How Your Money Struggles Affect Your Kids

With some effort, you can reduce the stressful effects on the family

Couple discussing energy bills while daughter plays on sofa in living room
Photo: Monty Rakusen / Getty Images

If you are living paycheck-to-paycheck, overwhelmed by debt, or are struggling in another way financially, your money issues are affecting your kids, and not only in obvious ways, like not having the funds to do the things you want to do.

Your money struggles may also result in social and emotional issues for your children, not to mention money problems of their own.

How Debt Affects Your Kids’ Well-Being

A study from the American Academy of Pediatrics found a correlation between the amount of total debt a family had and poor social and emotional well-being of the children.

The research found that the type of debt owed plays a role, citing that children whose parents held a high amount of credit card and medical debt experienced a more significant decline in their well-being compared with children whose parents had a high amount of mortgage or education debt.

This news can be a bit discouraging, but it doesn't have to be. Just because your financial situation is less than ideal doesn’t automatically mean your kids are destined for emotional issues or financial ruin themselves.

If you are mindful of the potentially negative impact your money problems can have on your children, with some effort on your part, you can reduce that impact. Here’s how to do that.

Don’t Keep Your Kids in the Dark

You may be reluctant to share the negatives of your financial situation with your children, but keeping them in the dark will only give them a false sense of reality.

It will also prevent them from learning from your mistakes. In T. Rowe Price’s 2017 Parents, Kids & Money Survey, 68% of kids who knew of their parents’ bankruptcy considered themselves “smart about money” versus 30% of the children who were unaware.

If your kids are clueless about what’s going on, that can even heighten your money problems, as you may continue to make poor financial decisions out of guilt or to try to keep up appearances.

Be upfront with your kids about your situation and use the opportunity to discuss where you went wrong and what you would do differently. Naturally, use your judgment and avoid divulging anything that would threaten their sense of security or frighten them.

Involve Them in the Process

If you are taking active steps to clean up your finances, go even further than letting your kids know about the situation and actively involve them in what you are doing.

If you’re paying off your debt, your children can help you track your journey. Finding ways to celebrate your progress as a family will keep things fun. Your kids can be involved in meeting savings goals or in finding ways to spend less money as a family. When you do your monthly budget, ask the kids if they have any needs for the coming month.

Doing what you can to include your kids in the family finances will make money a natural part of your conversations, an important factor in making sure your kids don’t repeat your money mistakes.

Watch What You Model

Parents are considered to be the number-one influence on their kids’ money habits and behaviors, so what you model has a lot more weight than what you formally teach them.

If your kids only see you overspending, being impulsive, or prioritizing your wants over your needs, they will pick up the wrong messages about money. What they hear you say about money has equal importance.

Be intentional about making sure you demonstrate a healthy attitude toward money and positive financial habits. Let your children see you weighing your spending decisions, delaying purchases you cannot afford, saving, investing, and practicing other healthy behaviors.

Your kids are not financially doomed just because you made mistakes with money. But if you don’t want them to follow in your footsteps, use these tips to help steer your children toward habits and behaviors that will lead to financial success.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. American Academy of Pediatrics. "Parental Debt and Children’s Socioemotional Well-Being," Page 1.

  2. T. Rowe Price. "T. Rowe Price: Parents Are Likely to Pass Down Good and Bad Financial Habits to Their Kids."

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