Teaching Kids Fiscal Responsibility

Feb. 28, 2009— -- Eleven-year-old Isabel Bilyk, her sister Natalie, 8, and their little brother Sammy, 5, are just like many kids their age; they want things that come with a price tag. Sammy's bedroom is a showcase of stuffed animals, Legos and cars. His latest fantasy? To be a ninja. But that requires equipment.

"Can I have a sword?" Sammy asks his mother Nancy Bilyk. "Can you have a sword?" she replies, bemused.

Bilyk says it's so tough to say no to her three children. "Oh it's brutal! Just the look on their face just gets ya!" she says. But their wish list seems endless. Every day they ask for something different, from iPod speakers to a new cell phone and new clothes.

Just Say No Is Not Enough

However, in these tough economic times, Nancy has been having to say no a lot more. The children have been keeping score of how often their parents say no these days.

"Fifty!" Sammy exclaims. "No, 15 percent!" Isabel jumped in. "Fifteen percent, 15 percent," all three kids finally agree. But what they don't understand is why their parents are cutting back so much.

The Bilyks used to eat out often, but now they rarely do. Instead of ordering in, they make pizzas with wheat tortillas. Like so many families across the country, Nancy and her husband, Tom, have suffered deep losses in their 401(k)s, and their house has lost value, while their pay stagnates.

"We personally have not told them anything about our personal situation," Nancy Bilyk says. Tom says the situation is tricky to explain to the kids: "We talk about how we can't do camp, or you know we can't fly for this vacation, we can't do certain things."

But when kids hear only what they can't do without understanding why, they fear the worst.

"I feel like we're really going down. I'm getting kind of scared because I think we might lose our house," worries Natalie.

"Children have strong reactions, they see things in black and white," says Eileen Gallo, financial psychologist and co-author of "The Financially Intelligent Parent." She explained that children can be more anxious if you leave them in the dark. So she advises parents to have an honest dialogue with their children on money matters.