When Money’s Tight: Teaching Kids Financial Resilience

Between weekly grocery runs, school fees and the “surprise” expenses that seem to pop up every month, many parents are left wondering how raising kids became so expensive.

Parents find themselves struggling to afford everyday necessities, such as food and clothing, according to the recent RBC Family Finances Poll, Parenting Edition. Then there are the “extra” expenses that aren’t always included in family budgets, such as after-school activities, children’s braces and eyeglasses.

Everything can add up so quickly, placing parents in the uncomfortable position of having to make decisions that could significantly impact their family’s current or future financial situation.

Parents are making tough trade-offs

Ultimately, financial stress is about more than just numbers. It’s the added pressure to spend, the fear of not being able to give your children everything they need, and the guilt you feel after making difficult trade-offs.

“As a parent of young children myself, I understand the desire to give a child every advantage possible in life,” says Dawn Tam, regional financial planning consultant, RBC Financial Planning. “It’s important, however, to consider if this is being done at the expense of what we can provide for our children as they grow older, or for ourselves as we grow older, too. I think as parents sometimes we need to give ourselves grace and know we are doing the best we can with what we have in the moment.”

Of particular concern, explains Tam, is the two-thirds of parents who indicated in the RBC poll that they had, or would, sacrifice their own financial future to spend more on their children today, with many admitting they have already dipped into their savings or taken on debt to do so.

“A critical challenge arises when parents underestimate the long-term consequences of such sacrifices. The red flag we raise here when advising our clients is to make sure the choices they’re making won’t cripple their current—or future—finances,” Tam explains. “Reducing retirement savings or taking on high-interest debt, for example, may delay your retirement timelines or lead to drastic lifestyle adjustments later in life.”

Tam adds that it can feel overwhelming for parents trying to balance their children’s needs versus wants and at the same time protect their family’s financial future. The good news? You don’t need to figure out all the answers on your own.

Tam suggests, “Take advantage of all the financial advice resources available to you, including professional advisors. Having a conversation about your finances with an RBC advisor, for example, can help you uncover hidden opportunities to stretch your budget further. They can also help you adjust your plan as your family’s needs evolve, from early childhood to the teen years and beyond.”

Tips for money conversations with your children to help manage “spend now” pressures

As for what you can begin doing at home, these challenging moments offer powerful teaching opportunities. Tam recommends getting your children involved in age-appropriate money conversations, transforming financial constraints into life lessons about priorities, decision-making and smart spending habits that will serve them well into adulthood. “Help them start to see that saying yes to one thing may mean saying no to something else.”

Below are three sets of practical tips from RBC, grouped by children’s ages, to help get those money conversations kick-started.

Ages 3 to 7: Introduce basic money concepts, such as that money has value, choices involve trade-offs, and we can’t have everything we want.

• Involve children in small decisions: “Should we buy apples or bananas today?”
• Teach delayed gratification: “We’re saving for our family trip, so we aren’t buying toys or games this month.”
• Use simple analogies to illustrate the difference between wants and needs: “Think about your plate at dinnertime. First, we fill your plate with healthy food you need to grow strong. Then, if there’s room, we add a little dessert we enjoy. If we start with dessert, we won’t have space for what we really need.”
• The lesson: Money is limited, and choices matter.

Ages 8 to 12: Explain budgeting and income sources, and reinforce family priorities.

• Show how the money coming in for your family covers essentials (e.g., housing, food) before it can be used for “extras.”
• Use visual tools: A jar system for saving, spending and donating.
• Discuss trade-offs: “If we spend money on soccer camp, we won’t have enough for the summer vacation. Let’s discuss which is more important to our family.”
• Re-emphasize limitations: “Sometimes we have to say no to things we want so we can make sure we have enough money for the things we need.”
• The lesson: Financial decisions are connected to what’s important to us today and in future.

Ages 13 to 18: Involve teens in planning, problem-solving and real-world money management.

• Share high-level budget overviews (e.g., savings goals, monthly expenses).
• Collaborate on teen-specific budgets (e.g., allowance, earnings from part-time jobs).
• Address fear of missing out and peer pressure: “I know your friends have the latest phone, but here’s why we’re not buying one yet.”
• Show by example: Discuss your own money mistakes (e.g., impulse spending, overspending) and how to recover from any missteps.
• The lesson: Good financial health requires planning and honesty.

Making your trade-off conversations productive

Regardless of age, frame financial limitations positively. Instead of “We can’t afford that,” try “That’s not in our budget this month, but let’s think about what we can do” or “What would we need to give up to make that happen?” Conversations like these will help normalize the reality that all families—well off or not—make choices about priorities. When children understand that trade-offs are simply part of adult decision-making, money stress becomes less intimidating and more manageable.

The bottom line

Whether it’s connecting with a professional financial advisor to get yourself back on track or having conversations with your children about ways to save money for what’s important, even the smallest changes to the way you’re managing money can help relieve some of the pressure you may be feeling to do it all. Over time, the decisions you make now can help you feel more in control—and more confident—about money.

To help you get started, explore RBC’s online resources and visit rbcfinancialplanning.com.

Disclaimer 

This is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. The information presented is believed to be factual and up to date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.