Santa on a budget? What to tell your kids

Courtesy of Flickr user Bart Fileds

Christmas is around the corner, and if the fat man in the red suit has his way, it could mean financial trouble for you. Did you ever wonder why he's so jolly? It's because he gets credit for all the toys, games, and presents while you get stuck with the bill. If you're struggling financially -- and, frankly, who isn't -- it's time to put Santa in his place.

Listen up Dorothy; we're not in 2007 anymore. Things have changed. You need to bring your kids up to speed on the new paradigm. If you don't talk to them, it's not their fault for asking for the latest tech gadgets and other high-cost toys this season. It is your job to educate them, and even though it would feel great to be able to buy them what they want this holiday, this is an amazing opportunity to teach them financial responsibility.

If you don't talk to your kids, you will be doing them a huge disservice. Silence does not protect them, it hurts them. Most kids, even fairly young ones, can sense financial problems. They hear things on TV and the radio. Their friends' parents may be losing their jobs. Kids will ask for Christmas presents just to test what you'll say to get an indication of how bad the family's finances really are.

That said, you also don't want to freak your kids out. The easiest way to scare them is to not say anything. Even if you are doing fine and are relatively unscathed by what's happening, call a family meeting (I know that sounds so Brady Bunch, but you want to convey the meeting's importance) and have a conversation. If you don't, they are going to worry.

But what if you're in the camp with the rest of us who have been crippled by the economic downturn? It's a tougher conversation, but it's even more critical. Here are a few tips:

Don't offload your burden on them. If you've bottled up your frustration and fear, the minute you begin to open up, it can burst out in unexpected ways. You need to get a grip. That means no crying or "oh my Gods!" allowed. Again, you do not want to freak them out. Let them be kids.

Don't overwhelm them with information. Think slow leak, not a flood. Share a little now and more later.

Ask them what they know about what's going on. You might be surprised. It's good to get their perspective. If they start crying and talking about becoming homeless, your job is to reassure and comfort. If they are clueless about what's happening, don't think your job is done. I've heard some "experts" suggest that parents shouldn't talk about unemployment or recessions if their children aren't aware of it, but I totally disagree. You need to talk about what's going on and educate them.

Manage their expectations. Let them know that their stockings might not be as full this Christmas, but that they're still going to have a great time.

Shut up and listen. Don't turn the conversation into a one-sided lecture. Listen to their concerns and fears. Let them ask questions. If they aren't opening up, ask questions such as "Have you heard anything about the economy at school? Are you worried about anything? Are any of your friends talking about what's going on?" Your initial goal is to get them to share what they know and figure out if they are worried about anything specific.

One thing not to do: Pretend everything is fine and rack up debt on your credit cards. It's not worth it. The momentary joy you feel on Christmas morning will be replaced by anxiety and regret long into next year, and you'll be putting your family's security at risk. Do this and the only yuletide spirits you will experience are the spirits you'll be drinking to try to wash away your financial troubles.

  • Robert Pagliarini On Twitter»

    Robert Pagliarini is obsessed with inspiring others to create and empowering them to live life to the fullest by radically changing the way they invest their time and energy. He is the founder of Richer Life, a community of passionate people who want to learn and achieve more in life and at work. He is a Certified Financial Planner and the president of Pacifica Wealth Advisors, a boutique wealth management firm serving sudden wealth recipients and affluent individuals. He has appeared as a financial expert on 20/20, Good Morning America, Dr. Phil, Dr. Drew's Lifechangers and many others.