With the economy in free fall and disposable cash becoming a scarce resource, many parents are finding themselves using a word their kids haven't heard a lot before: no
. But there is a bright side to all this belt-tightening, says Carrie Schwab-Pomerantz, senior vice president of consumer education at Charles Schwab & Co. and coauthor of It Pays to Talk
. "This is the perfect opportunity to start an important conversation about your family's money values," she says. Here's how: Be Honest but Upbeat
When it comes to economic news, younger kids need to know only the basics: "Tell them that a lot of people in business spent more money than they had and now they have to pay it back, so they can't spend it on other things, and that means that some people have lost their jobs," Schwab-Pomerantz suggests. "Be calm and reassuring. Let them know that while hard times are temporary, they remind us of how important it is to save."Stress Priorities
"With children as young as 5 or 6, start by having a conversation about the difference between wants and needs," says Schwab-Pomerantz. Explain that you will provide them with all their needs and give a small allowance (50 cents or $1 a week), which they can save up for wants, like stuffed animals or candy. Schwab-Pomerantz encourages parents to include older children in conversations about living within a budget. You can say, "We can't go out to dinner as often as we did before, but let's all pick our favorite restaurant for a once-a-month treat."Teach Savings
Your little one can decorate two empty jars and divide his allowance between them: one jar "to save" and one "to spend." As your child gets older and has a few extra dollars from collecting cans for deposits or assisting with chores, help him open a savings account. "Go to your local branch together, introduce him to the banker, and fill out the paperwork together," suggests Schwab-Pomerantz. "Explain that it's always important to have a rainy-day fund, whether you are 5 or 65."