'We can't afford it': Why you shouldn't say this to your children and how to develop a healthy attitude toward money in them

Stop telling your children, "We can't afford it." Your attitudes can hinder their financial literacy and set them up for poverty. How to teach a child the right attitude toward money, explains CNBC.

"Can we go to the Galápagos Islands for spring break?"
"No, we can't afford it." Sound familiar? Sooner or later, every child will ask for something that's way beyond your budget.

As soon as kids start school, they notice the rides, toys, cars, and experiences other families have. Maybe they see the Cybertruck pulling up to school in the morning. Maybe a friend just returned from a luxury vacation. Maybe they want a pool in the backyard.

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When you refuse one of these requests, they will inevitably ask, "Why?"

This moment can be frustrating. It's hard to deny a child what they want. Asking for something can trigger old memories of lack or awaken feelings of shame about not being able to afford what others have. These emotions can easily lead to irritation or even the urge to shut down the conversation with the phrase, "We can't afford that."

It's best to avoid this phrase altogether when talking to children. Let's look at three reasons why you shouldn't say it to your child, and what to do instead.

1. Most likely, you are lying.

That's not entirely true, and kids sense it. Let's be honest: if you really needed it, you'd probably find the money. For example, you could:

• take out a loan secured by housing
• sell a house or things
• exhaust the credit card limit
• get a second or third job and work nights, weekends and holidays.

The point is, if your child isn't asking for a private jet, you could probably find a way to make it happen. So, "We can't afford it" usually doesn't work.

2. This creates attitudes about money that are based on a sense of scarcity.

Imagine a child who was never allowed to eat sweets. What do you think will happen on his 18th birthday? He'll eat sweets nonstop. It's the same with money.

If a child hears "We can't afford it" throughout their childhood, they may internalize a sense of financial scarcity. When they reach adulthood and gain access to credit cards, student loans, and easy financing, their emotional response may be, "Now I can finally have everything I never had." This can lead to overspending, misuse of credit, and years of financial stress.

The phrase "Why aren't we buying this?" works differently. Instead of suggesting that money is tight, you can explain the reasons why you prioritize other things.

3. You are missing an important learning point.

When a child asks for something expensive, you have the opportunity to explain:

• Why are certain expenses not included in the budget?
• what does your family save for?
• Why do you prioritize long-term goals over short-term desires?
• How overspending on cars, travel, and housing leads many people into financial trouble
• Why the ability to wait is important.

If your child asks for something unrealistic, like a Caribbean island, don't brush it off. Use it as inspiration. Talk about entrepreneurs and investors who have built such wealth that they can afford such dreams, and how your child can also strive for big goals.

So what exactly should be said?

Research shows that children who are good with money as adults are more likely to have grown up in families where money was discussed openly.

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Instead of cutting off the conversation with a sharp, “We can’t afford it,” try saying, “Yes, we could, but we spend our money on other things, and here’s why.”

Then explain your reasons. Perhaps you:

• pay off the debt
• save up for a house
• investing for retirement
• choose to work less to spend more time together.

Talk about what's important to you. Explain how saving, investing, and smart financial decisions allow you to live the life you want and achieve your goals.

These conversations will help your child develop a healthy relationship with money.

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