Yes, your kids do need to know your business. Finances are a part of the family business. Do not shield your children from your finances. Of course, your 6-year-old does not need to know your credit score and the steps you are taking to improve it, but they learn from seeing you paying attention to your bills. Also, your teenagers will be working on their own credit score soon enough. Do not deprive them of this learning opportunity. Shocking statement here. Teenagers like money. They want to get it and lots of it so you can help them start to think about how they are going to do it. Talk about your money and how you plan and deal with it. Let them know some mistakes you have made and the consequences. The benefits of sharing with your family far outweigh any negatives, especially now as financial experts predict a credit crisis, further delaying an economic recovery.
Here are ways to prepare your family for a credit crisis:
Address & Tackle Debt
- Paying down debt is almost always a good idea, especially now. Talk to your family about paying down debt. As the pandemic has spread around the globe, we all have taken stock of how we live our lives. Like most crises, it has brought out the best and the worst of us. Best case scenario, the pandemic has left us feeling a little insecure. Tell your family why you worry about large debt balances. Speak about how high interest debt has the power to cripple your budget. If you are worried about debt you are not alone. Check out this article. “The amount of consumer revolving credit, which is mostly credit cards, plunged by another $24 billion in May, the Federal Reserve said Wednesday. This costly form of debt is down more than $100 billion since hitting a record high in February and is now below $1 trillion for the first time in nearly three years.” Wow! What a change in behavior! This goes to show that we are worried indeed! Paying down debt is always a good way to help avoid a credit crisis. Here is help.
Address Savings & Take Stock of Assets
- Speak to your kids and explain your “why” about savings. What makes it important? What would you do if you did not have any savings and experienced an unexpected expense/emergency? Do you have other reserves you could tap into? Maybe there is an insurance policy with cash value. Do you have an old retirement or 401k balance sitting in an account that was starting from a past job you have moved on from? Of course, also stress how important it is to consult a Financial Advisor first before making an retirement account moves. Take stock of the assets you own. You may be able to sell some things in a crisis. Complete a net worth statement. It can be used to check your progress and what you have and what you can make use of in a pinch.
Don't Give in to Panic
- Do not give in to panic with your health or your wealth during a pandemic and your family can help. “If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” -Warren Buffett. Talk to your family about why you continue to invest. If you are in the stock market, you keep investing even during a pandemic. Retirement is a long-distance race. You want to buy stocks when they are cheap (i.e. during a pandemic) with the belief that they will be worth more later. Talk about why the stock market is not the economy. You are ensuring that you have enough retirement not to haunt your kids when they are adults. I am going to haunt my kids but on my own terms (hahaha).
Foster the Entrepreneurial Spirit at Home
- Encourage your kids and your significant other and everyone you know to start your own business. My girls setup a card table in front of the house with a poster board sign taped to the front. The youngest sold cups of pink lemonade for an outrageous $1 while my oldest offered personal caricature drawings for a ridiculous $5 a pop! When I got home from work that day, they had easily out earned me for the day! They learned to interact with people in a different way then they were used to. It opened opportunities to discuss what they would do with that money earned. It brought more income into the house! They have since moved on to selling rubber band bracelets they had made and other craft projects. Side hustles and owning your own business will always help you avoid a credit crisis. The more self-reliant your income and the more diversified your income, the safer it will be.
The way you prepare your family for a credit crisis is to communicate with them on the regular. Be open about money. Speak up about your worries and share your knowledge. Whether large or small, families are stronger as a unit.