Financial Talk With Children

Be it a sudden job loss, debt accumulation, poor spending habits or divorce, kids often bear the brunt of a souring financial situation. Brad Klontz, a certified financial planner and psychologist, came up with a term for this money disorder among adults: ‘financial incest’ or ‘enmeshment’.  Should you burden the children with financial problems like sudden job loss, debt accumulation, poor spending habits or a divorce?  How should a parent interact with children in the right manner? ET Wealth came up with this article on 22 Apr 2019.

This image shows the way to talk to children about the bad financial situation.

How to explain bad financial situation to children
How to explain a bad financial situation to children

Zindagi Na Milegi Dobara

Remember Hrithik Roshan in Zindagi Na Milegi Dobara. Hrithik Roshan’s character, Arjun, is a financial trader working in London who wants to make enough money and retire at the age of 40.

He believes that since he faced hardship all through his childhood, he should have money when he retires. He believes future financial security is important and is willing to give up on his present to get there. 

This clip shows how kids carry the burden and how it affects their choices.

Is your financial behaviour hurting your children?

Indulging in ‘financial incest’ by burdening the children with one’s money problems can damage their financial personalities. Find out how to avoid it by interacting with them in the right manner.

The worst collateral damage in any conflict between spouses is usually children. Being soft targets, they are, unwittingly or otherwise, treated as sounding boards or punching bags for parents’ frustrations, anxieties and insecurities. It’s no different in case of financial problems. Be it a sudden job loss, debt accumulation, poor spending habits or divorce, kids often bear the brunt of a souring financial situation. Brad Klontz, a certified financial planner and psychologist, came up with a term for this money disorder among adults: ‘financial incest’ or ‘enmeshment’.

What is financial incest or enmeshment?

When adults burden or over-expose kids to their financial problems to reduce their own stress, they are indulging in ‘enmeshment’. This is because unhealthy exposure can be daunting for a child, often marring or even maiming his financial acumen. It can lead to anxiety over money, skewed attitudes and poor financial habits. In a study published in the Journal of Financial Therapy, in 2012, Klontz described it as the “inappropriate involvement of minor children in parental financial matters, including conversing with them about financial stress, and using children as messengers to pass along financial messages between adults”.

What are the ways in which financial incest is committed?

Here are some ways in which you are subjecting your child to money stress: You are blaming the spouse for the shortage of money, whether it is due to his poor spending habits or non-payment of maintenance after divorce. You are making the kid guilty about the effort you are putting in to fund his requirements, be it education or entertainment. You are sharing your stress about the loss of job or lack of increment and feel better after venting on the kid. You are using him as a buffer for your failure to meet financial obligations, such as payment of bills, loans, EMIs or rent. You are suspending his pocket money or curbing his spending due to frustration about financial spats with your spouse.

What is the impact and is the damage lasting?

“If you are burdening the child with information about a situation that he can’t control or resolve, it will lead to resentment or guilt,” says Priya Sunder, Director, PeakAlpha Investment Services. If he cannot find a solution to the problem or alter the circumstances, he will feel frustrated, leading to extreme financial habits like reckless spending or stinginess. He could turn into a workaholic or refuse to hold a steady job, or even have poor financial compatibility with his partner later on. “The impact may not necessarily last too long unless the child is subjected to sustained behaviour or is constantly deprived of money,” adds Sunder.

How can one talk money with kids without hurting them?

It is always a good idea to have money conversations with children without introducing negativity, aggression or blame games. “Children are very smart and if you sit down and explain the situation, they will immediately understand,” says Sunder. So, as long as you discuss it without blaming the kid, and encourage him to offer a solution to the problem in order to resolve it, it will be a win-win situation for both,” says Sunder.

How to talk to children about bad financial decision

A bad financial situation explained in the wrong manner can induce anxiety among kids. Know how to say the right thing at the right time.

Refusal to buy things due to limited income or fund shortage


“Do you know how hard I have to work to run the house and support you? I can’t fulfill all your demands all the time!”


“I earn a fixed amount. Of this, I first need to take care of essentials like food, clothes, bills and loan repayment. Only the money left after these expenses can be spent on luxuries and entertainment.”

Spouse’s poor financial habits


“Your mother spends all the money on her dresses and jewellery! How will we ever save for your foreign education?”


Sit as a family and calculate the amount required for education. “We will all have to cut corners and bring down our discretionary expenses if you want to study abroad. We can even take a loan for it.”

Financial problems of separation or divorce


“You can’t go for the school trip because your dad does not pay the maintenance regularly and I don’t have enough money!”


“I have a limited income and first need to take care of the essentials. If both of us try to save more, you can go for the trip next year.”

Dealing with creditors


“Please tell uncle that dad will not be able to pay you since he is out of town and will be back only after a month.”


Do not force the child to lie on your behalf. Chart out a plan to repay your debts. Then sit down and explain to the kid why you can’t make the payment immediately and how you plan to do so in the future.

Loss of job


“We can’t go on a holiday because I’m saying so! Just accept it!”

Hiding the fact from the kid, pretending all is well, and making excuses for cutting down on holidays or eating out.


“I want a higher paying job and am already looking for it. I should be able to find it soon. Till this happens, we will have to cut down on our discretionary expenses like eating out or fun trips.”

My experience

I grew up in the middle-class family. We were told the value of money.

When my parents built a house, I was around 7 years then, my mother explained to us that as we are building a house we have to be careful about money. We would have limited dresses, games and gifts for some time. The school will be as usual. She told us in a calm and cool manner. She asked us if we would like to contribute to the house. We gave the money(some 800 Rs in early 1980’s) that guests had given. (Which we still claim that they have not returned ).

It made us feel good that we are contributing to a dream. And it helped us realise that everyone needs to make some sacrifices to get the bigger things in life.

Did you have a bad financial situation in your family? How did your parents deal with it? How did you deal with it? What money experiences affected you?

1 Comment

  1. This is a nice post with practical advice how to deal with financial problem / crunch by talking with children the right way. One most important advice is don’t force children to lie for you (parent).

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