Turning layoffs into lessons
Tough times can teach kids about family finances
NEW YORK - Greg Cramer had hoped the salary boost from his new job would make life a little easier for his family. But just a few months after starting work as a factory manager last year, a major customer's financing fell through and he was laid off for the first time in his career.
The plant shut down for three months. Cramer then went back to work for about eight months, only to be laid off again. The Toledo, Ohio, dad might still be unemployed if he hadn't decided to buy his own business, which links manufacturers and companies looking to get products made.
At home, the employment roller coaster meant living on unemployment checks that provided about 80 percent less income than his paycheck. And there was no severance package. So instead of adding a few luxuries, the Cramer family had to pare back its already modest lifestyle.
At first, his daughters, Renae, now 16, and Emily, 13, were worried. Would they lose their house or have to move and give up their friends? Could they still plan on going to college?
"My wife and I explained to them we are frugal people, we have a savings account, we will survive this," Cramer recalled. "We had some adjustments here and there about attitudes, but continued to teach them that tough times fall on everyone."
The experience brought to life a debate that parents throughout the country are having as the recession grinds on and unemployment becomes ever more common: Should you tell the kids that you lost your job? And should they be involved in making decisions about how the family spends money while they're out of work?
A lot of parents don't want to burden their children with concerns they can't do anything about, said Jerry Shapiro, a psychologist and professor of counseling psychology at Santa Clara University in California. But if the income loss means lifestyle changes, he said, it makes sense to include the kids.
That doesn't mean involving them in trying to figure out how to pay the bills. But it does involve making sure they understand the reason for things like cutbacks to family vacation plans or the loss of their favorite cable channels.
"If the parents can't afford certain things [for the kids], they need to tell them," Shapiro said. "Children are remarkably adaptable." he added. "Even though they can be unbelievably difficult in some circumstances, at times when the family needs to pull together, they can be right there, as long as they're a part of it. Teens especially so."
One test for Renae Cramer came during preparations for the prom.
"We gave her a budget," her father recalled. "It was a big budget, until she talked to her friends, and then it seemed very, very low."
To help stretch the available dollars, Greg Cramer asked friends and family if anyone had a dress Renae might use, a query which produced a cousin's gown. "She got a $500 dress to wear to prom that was custom made, that we would never have bought if I was working full time," he said.
Renae was reluctant to compromise at first. "I wanted to go with my own dress," she said. But she found out she wasn't alone. "Other people did it too, so it wasn't that big of a deal," she said. "When it came down to it, you're only wearing it for a little bit."
Plus, she said, the dress she wore was really pretty.
For her younger sister, disappointment came when she learned the family wouldn't make a return visit to Mexico, where they vacationed a year earlier.
Such experiences can be useful for parents who strive to teach their kids how to handle finances, said Paul Golden of the National Endowment for Financial Education.
"It might be something beyond cable or the family vacation. It might have to be both," he said. "As soon as the parent starts talking about money with kids, the sooner they'll understand when challenges arise."
Make sure the information given to the kids is age-appropriate. "Talking about a world economic crisis is meaningless to children," said Shapiro of Santa Clara University. "Everything has to be geared to the child's age."
Very young children have little concept of what money is, he noted, but older kids will sense that something is going on if mom or dad is suddenly home more often or other lifestyle changes take place. They should be told the circumstances in ways they understand.
One thing to be aware of, Shapiro added, is that children will often imagine responsibility for situations they have no control over.
Emily Cramer said her parents tried to keep things as normal as possible, but she was often afraid to ask for extras. "I always felt guilty for asking for anything," she said. "They didn't make me feel guilty, that's just how I felt about it."
Golden of NEFE said issues like that can help teach kids how to handle problems. "It's not just presenting a financial teachable moment, it's presenting a life and responsibility teachable moment."
Renae Cramer said she learned through the experience about accepting things that might not meet your expectations. When she first got her license, for instance, her dad said she wanted a new Ford Mustang. She ended up driving something less flashy - her great-grandmother's 1990 Oldsmobile.
"I wanted a car and needed to drive, but I wasn't so happy about it," she said. The car wasn't what she hoped for, but after a while, it just became something she would joke about with her friends.
"Some things seem like you need them," Renae said. "And you really don't need them."