“We Don't Have Money”: What to Say to Teach Decision-Making

Many parents say "we don't have money" to end an argument. It's understandable, especially when money is tight: Sendhil Mullainathan and Eldar Shafir (Scarcity) show that when something is scarce the mind narrows and there's less room to think calmly. But the phrase closes the conversation and doesn't give the child a clear idea of what's happening. Having phrases ready before the tense moment changes that.

How to do it: three phrases with three parts

Each phrase says what's happening, what gets chosen and what comes next:

• "We're not buying that today. We can choose between these two things."
• "This costs more than we can spend this week. Do you prefer this toy or going to the park?"
• "We're saving for this. When we reach the goal, we buy it."

Write them in your phone and use them for two weeks until they come out on their own. If the situation is hard, explain it at their size: "We're taking care of our money for what matters most."

What it's for

For your child: they go from "there's nothing" to "there are limits and within them I can choose." They feel safe, not scared, and learn that a limit isn't rejection. For you: you stop feeling guilty for saying no and stop improvising under pressure; with the phrase ready, your "no" sounds like a decision and not a defeat.

What the research says

Ron Lieber (The Opposite of Spoiled) recommends being honest with children about limits, without loading them with adult details. Fletcher and Wright (2024) found that parents' regular conversation about spending is related to better financial understanding in children aged 4 to 6. Albert Bandura showed that children learn from how we handle a hard situation, not just from what we say.

What you'll see over time

• First weeks: less immediate meltdown; they ask "and when yes?"
• Three to six months: they propose an option on their own ("what if we wait for my birthday?").
• Long term: growing up watching adults decide within limits, without fear, is associated with a calmer relationship with money (Gudmunson and Danes, 2011).

Signs it's working

After the "no," your child asks for an alternative instead of insisting; says "maybe another day"; and calms down faster. If the meltdown stays the same, check whether the phrase has all three parts and whether you say it in the same tone every time.