After a divorce, how to talk to the kids about money

No matter how rocky the divorce, if the household has children, both parents usually want to make sure the kids feel as secure as possible. Part of instilling that sense of security is discussing the family’s financial picture.

The finances for both soon-to-be ex-spouses will likely change. And usually not for the better, given that two households will be living on the same income that had been supporting one.

When a divorce hits a family with children, the average income of the household where the kids reside drops an average of 40% to 45% if the primary custodial parent, usually the mother, remains divorced for more than six years, according to the National Bureau of Economic Research. Moms who divorce or separate also land in poverty almost three times as often as those who stay married, according to a Family Research Council study.

Causes: the monetary value of spending time with children, as well as the lost salary and career impact, usually is not calculated in divorce settlements; and child support often falls short and further falls behind as children age and their needs increase.
How do parents explain this often-grim new economic reality to their children, particularly during such an emotional and vulnerable time?

If the kids are under 10 years old, simple expense-related explanations may be all that’s required if the children are staying in the same schools and home. “We’ll have to drop the karate classes for awhile, guys. But hey, let’s replace that time with some extra trips out to the park with friends.”

If schools are changing, perhaps because private tuition is no longer affordable, the conversation may need to be a little more creative. Such a move, like that to a new house or neighborhood, also will likely be a disappointment. Still, focus on the positive. “The school has a great gymnastics team. Our new house is a 10-minute drive to the beach.”

Teenagers might need to know specifics. If splitting up will change your financial picture radically — as it often does — the view in your kid’s mind may differ from reality, based on what he or she has seen provided to older siblings or peers in your neighborhood or school. Discuss how you will or will not be able to help pay their college tuition. Warn that a car might not be a birthday present this year, if that is an expectation among peers.

Creating a household budget that shows the sources of income and the expenses, both mandatory and optional, that all family members understand and take part in may be a worthwhile exercise. Perhaps provide the children, if they are old enough, with a budget in a spreadsheet. Going through the budget is also an opportunity to teach some valuable life lessons regarding financial responsibility and choices.

Mention that a part-time job could replace an allowance, and remember that earning money can be a tremendous source of confidence for your teen. Work with their growing need for independence, and help them figure out ways to get the things that they need or want that are not in the family budget.

Sometimes, a child may have to improvise to obtain something once thought to be a given. Encourage this. I know a child, a high school freshman, in advanced placement math, who felt she needed some tutoring, but money was tight after a divorce. So, the enterprising young woman started tutoring 6th- and 7th-grade students to pay for her own tutor.

Parents sometimes also may have to come up with alternative solutions. Consider the phenomenon of “nesting” children after a divorce. This term means that the kids get to live in the house, and the parents move in and out, as the custodial and visitation schedules allow. No more uprooting the children to see Dad, or Mom, at an apartment cross-town for the weekend or the summer. Dad comes back home for the weekend or longer. Mom moves out for the weekend or longer.

Maximum stability for children is the goal with nesting. It might also, however, lessen the possibility of one parent out-spoiling the other parent, an activity often referred to as Disney Dad syndrome in which non-custodial Dads take the kids on a vacation to Disney World while Mom takes them camping.

Adult-age children, meanwhile, might need to understand how an estate plan works, particularly if you have established trusts, or simply what’s in the will and its location.
They will need to know they are being taken care of, that the proper investment and banking vehicles are in place, and the arrangements treat everyone fairly.

Adult children also may need to be reassured, just like younger offspring, that the financial changes affecting one or both of their parents may be difficult, but manageable.

This communication will be important to establish now; if remarriage comes along, estate plans can get even trickier, and will likely need to be amended. Attitudes among the adult children at this time can become suspicious.

When the children are this age, particularly in wealthy families, a financial adviser might be present when the parents discuss these issues with the children. An adviser, projecting authority and confidence, can explain the particulars and provide assurances.

A practical issue that may not occur to parents to discuss with their children is the need for the parents to acquire life insurance. A parent’s obligation to support his or her minor children does not end with that parent’s death. Therefore, courts often require the parents to insure their ability to continue to meet their children’s financial obligations, in the event of that parent’s premature death. One could argue that talking about a parent’s possible demise does not lead to instilling security in a child, but when that child is old enough, it may be a conversation worth having.

Talk to your children about money in an age-appropriate manner, without papering over the truth. Be sensitive but not overly opaque. Parents probably already know that their kids, unless they are in their 20s or older, do not yet reason like an adult and tend to misinterpret, exaggerating both fears and hopes.


Although divorce can often feel like a financial blow to both parents, it needn’t feel that way to their kids if communication with them is empathetic but also honest and if the children feel safe, secure, and loved.

Think of this time, too, as a perfect opportunity to teach your kids that although money is important as a tool, it isn’t everything. It’s quality time together, not the material stuff, that you and your children will remember.

Source: https://www.marketwatch.com/story/after-a-divorce-how-to-talk-to-the-kids-about-money-2016-05-26