Dreaming of a tight Christmas: Tips to keep kids happy when money is scarce

Young Laura's holiday prospects looked bleak. Her family was poor and the budget was non-existent. But when Christmas came she was overjoyed with Santa's gifts of a tin cup, a stick of candy, a sugared cake and a penny.

That was fine and well for Laura Ingalls in her little house on the prairie in the 19th Century, but is it possible for children in a 21st Century recovering economy to have a happy Christmas morning? Do parents need to keep up the same levels of material gift-giving now that the economy is precarious and jobs have been lost and incomes tightened?

"The best thing parents can do is acknowledge there is a change in the family finances and explain it in an age appropriate way," said Susan Beacham, the CEO of Money Savvy Generation.

For example, do the changes mean the family won't have food on the table? No. It may mean the family doesn't go out to dinner once a week anymore. Does it mean there will be no money for the holidays? No, it means being careful when making a list for gifts that has needs on it as well as wants.

And the distinction between needs and wants is an excellent topic to talk about with children during the holidays, Beacham said.

For very young children, Beacham said parents could have the kids write a letter to Santa with one category that says "Needs" and three lines to write three needs. The other category can be "Wants" with three lines to write their three wants for Christmas. Chances are the child will ask, "What's a 'want' and what's a 'need?'"

This is a wonderful teaching moment, Beacham said. The parent can then walk around the house with the child and point to things like an Xbox and identify it as a "want" and point to clothes as a "need." The parent can then encourage the child to go around the house and categorize things.

The three lines for needs and three for wants are ways to suggest limits and boundaries. "Instead of thinking they are going to get 20 things under the tree, you are suggesting six things," Beacham said.

Pat Frishkoff, a retired professor Oregon State University and a consultant for family businesses, said, "If a family is already in financial difficulty or is in anticipation of such because of pending cutbacks at work, the reality is that holiday spending should be drastically changed. It doesn't mean nothing, but spending needs to match the income."

Beacham advised a way to match spending and income. She said older kids can participate in deciding how to spend the gift budget. Beacham said to ask them whom they want to remember this year. And when the budget is gone, it is gone.