Mother discussing with boy.
Financial Literacy

Why Can't Our Family Afford That?

Ski vacations, summer camps or a new smartphone are not exactly cheap, and so are not a matter of course for all families. How can parents explain to their children why they cannot afford certain things, or would rather not? Daniel Betschart of Pro Juventute provides an answer.

Your son wants to go to the amusement park with his friends, your daughter needs a new smartphone. But how can you pay for this?

Calculate Out Loud

Help children to understand that you can or cannot afford certain things, by thinking and calculating aloud, and explaining. A lot of things are not immediately obvious to children. This starts when you go shopping together: Why are certain products put in the shopping cart and others not? Treat your children as equals and explain what has to be paid for with the money you earn. Show them that certain basic things (housing, heating, food) have priority, while others have to wait. In this way, you can help your children to understand that Mom and Dad also have to do without something sometimes – whether it's a nice dinner out, a vacation or a new computer.

Explain the Small Print

Advertising often contributes to awaking desires and sometimes to concealing the true price as well. Children see offers like "smartphone for one franc" and conclude that even their pocket money would be enough. They don't understand why their parents don't want to buy these products for them. Children don't realize yet that the cheap offer is only available when tied to an expensive subscription.
Parents can take such examples as an opportunity to look at the offer and the small print in greater detail and discuss it with their children: How does advertising work? What will the real price be?

Show Them All of the Costs You Face

It's important to show children how much day-to-day life costs. But often that isn't enough. Just because children know how much something costs, that doesn't mean they can gauge whether they can also afford it. Illustrate to older children how many things have to be paid for using an example from the family budget: After deducting rent, health insurance, tax, food, and possibly a car, there is often not much left. In this way, they learn about the full range of costs that have to be met, and start to understand that there have to be priorities. Younger children might not understand this fully – but young people of high school age certainly should. Nevertheless, parents also need to set a deliberate example, providing explanations from time to time and looking for solutions together.

Be Prepared to Say No Sometimes

The new European Consumer Payment Report 2017 shows that 28 percent of parents have felt under pressure at some time to buy products for their children that they couldn't afford. The majority gave in to the pressure and bought the children what they wanted. Even if parents only want the best for their children, always fulfilling all of their wishes will not produce the desired result because this gives children the impression that you can afford everything – even though this is not the case. Children can even think that money is available in unlimited quantities.
In this way they neither learn to wait nor to save, or only to buy something once they have the necessary money. Parents need to be brave enough both to explain the family's financial situation and sometimes to say no.

Even if parents only want the best for their children, always fulfilling all of their wishes will not produce the desired result.

Daniel Betschart

Find Alternatives

Obviously there are certain things that you need. For example, above a certain age you can't do without a smartphone. But the latest iPhone is expensive – both with and without a contract. If parents can't afford one, or would rather not, they need to discuss alternatives with the child. For instance, it would be possible for parents to pay for a smartphone but only for a model that matches their budget. If children want a more expensive model, they should save up the difference themselves. Perhaps birthday or Christmas money could be used for it? Or could they find an opportunity in the neighborhood to earn some extra cash by doing small jobs? Children and young people should play an active role and it's fine for them to be creative with "problem solving."