Explaining the Rising Cost of Living to My Daughter

The increased cost of everyday expenses is surely having a trickle-down effect — do the kids in your life understand what’s going on? Mother and household money manager Ruth shares how she's encouraging her daughter to interpret the current cost of living, and how that impacts the family's finances as well as her own.

Encouraging my daughter, who is now 15, to learn how money works in the real world is my best shot at ensuring she is prepared when the day comes and she leaves home. When the words ‘recession’ and ‘inflation’ are constantly in the news, I see it as a teaching opportunity, not something to protect and shield her from. Both of these things are a normal part of any economy and worth a brief conversation.

She said something the other day that completely cracked me up. I asked her what blog post I could write on money that she would actually read. Without hesitating for a second to try to protect my delicate ego, she said, “Mum, no offense. But nothing”. 

Ouch! Burn!

This intelligent, wonderful, creative, and honest child of mine is never going to pick up a single one of the most excellent 40-plus personal finances books that I have on full display on our family bookshelf. Let alone go to my website! I should have known better than to try. 

Contextualize money in a way that’s meaningful to them

But far from being defeated, I stick with what I know works for her. I’ve always found the best way to teach her about money is with actual income and expense information that is meaningful to her, and I’m lucky to have that at my fingertips with PocketSmith. Conversations over the dinner table about the cost of groceries are frequent, with straightforward explanations about why things have increased in price. And, more importantly, what we as a family can do about it:

  • Earn more
  • Change what we eat
  • Don’t waste food
  • Buy less of the ‘nice to haves’

Plus, she often heads along for the weekly grocery shop, and being consistently exposed over the years to the cost of her favorite foods means that she can’t help but notice that the price has increased for most of those items. Another useful expense that I’ll often share with her is our monthly electricity bill. Why? Because it is undeniable proof that her leaving lights on and having extra long showers costs us money! And I can easily show her how our bill increases annually, exactly in line with her entering her teenage long shower years. She is yet to change her habits, unfortunately.

Although I would be chuffed for my child to say, “Mum, tell me why eggs have gone up in price”, well, it’s not ever going to happen. However, it’s not hard for me to talk with my husband within earshot of her about the price of eggs… Sneaky yet effective.

Let them safely experience it for themselves

Now that she has an after-school job that provides a small yet steady stream of income, the conversations have become far easier and more relevant. We spent the day in town recently, and she invited a friend along. They went off shopping together, but I’d said I would love to buy lunch for them both; she just needed to let me know the cost, and I would reimburse her later. 

The next day she said they spent $33 at McDonald’s, but she was surprised at just how much it cost. Why was she surprised? Because she compared the cost to the fact that she only earns $35 a week in her job and that she also knows that as a family of three, we spend $250 a week on groceries. This led us to quickly chat about the other things she bought and also reflect on how much money her friend spent at the shops. 

All of this flows into her gaining an awareness of what life costs for us, her, and others, and led to conversations, just brief ones, that touch on money. 

Cultivate a non-judgmental environment for discussing money

One of the critical elements when teaching children about money is to talk about it without fear or regret. Many things were playing on her mind as she paid for their food, and these came up during our conversation. I think it’s important to help her verbalize them:

  • $33 was a lot
  • She would get this money reimbursed, but she still felt the sting of the expense regardless
  • She could have bought a cheaper lunch elsewhere (her favorite dumpling shop was just down the street)
  • Her friend chose this spot, and she wanted her to enjoy her lunch
  • The lunch was yummy!
  • It felt good to order and pay for it herself

As a person who often second-guesses decisions, I wanted her to feel okay about spending that money and enjoying her lunch. It was a special treat, one that she doesn’t often do, so I really wanted her to make the most of it. 

I would encourage you to tap into what your kids are curious about and talk to them about the money they earn and spend and, when appropriate, weave in your own experiences too, such as the cost of electricity!

Encourage them to explore their own solutions

I’m mindful that she doesn’t get hung up on what things cost, but instead finds solutions. I want my daughter to be a problem solver because most issues often have an easy solution. Well, I’m pleased to say that she is beating back inflation without my help. This year her school canteen put up all of its prices, which was one of the rare instances where she brought up money at the dinner table, not me! 

She thought it outrageous that a pot of instant noodles went from $2.00 to $2.50, nachos from $4 to $6, and so on, but I explained that due to inflation, they would be paying more to buy the products that they sell, plus the staff members’ wages have probably increased too. This means that the price of the food they sell needs to cover these increased costs and that she and every other hungry student is where they earn their profits. What’s her solution to this problem? It took me a while to realize that she has packed her lunch almost every day this year. Normally she was using the canteen a few times a week. Now, she just visits it for a small treat from time to time instead.

I love this. Without my knowledge, she is making her own financial decisions and realizing that just because the price has gone up, she is not a powerless consumer. She has choices too. And it also explains why she has been helping with the grocery shopping more, she can select what she wants for lunch, at her parent’s expense. Genius!

A future PocketSmith user in the making?

One final pleasing note to share is that as she was scrolling through the transactions on her banking app, telling me what she spent where and what she bought, I asked her if one day she would like to use a budgeting app like I do. “Maybe…” was the cautious response. That’s good enough for me! Within moments I showed her my PocketSmith pinwheel with a ten-second explanation of how it could be useful to her. Discussion over. Short and sharp.

I don’t want to push my luck so I’ll pause that line of thought, but the seed has been sown, and given we all were once teenagers, we know that she will mull that thought over and when the time is right, I reckon I can circle back to that conversation, gauge the response and maybe, hopefully, get her using a budgeting tool one day soon.

Ruth blogs at thehappysaver.com all about how she and her family handle money. What’s the secret? Spend less than you earn, invest the difference, avoid debt and budget each dollar that flows through your hands. She firmly believes that if you can just get the basics right, life becomes easier from there on in.

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