Kids pick up on stuff – more than we will probably ever realise.

You probably thought about how best to talk to your children about the Covid pandemic when it reached our shores more than two years ago. But what about the cost of living crisis?

The soaring cost of energy, fuel, food and more has pushed inflation to a 30-year high, with April’s figure, announced on Wednesday, predicted by some to top 9 per cent.

The Bank of England has warned it could surge higher still, hitting 10 per cent in the autumn.

For most families, the cost of living crisis has replaced coronavirus as their number one concern. From ditching the Netflix subscription and banning takeaways (or overpriced treats from the ice cream van) to the stress caused by squeezed budgets and runaway bills, children will have noticed that something is going on.

They may be confused if certain amenities are no longer around, and are being told “no” more often when they ask to buy something.

Louise Hill, co-founder of the pocket money app GoHenry, comments: “As UK households brace themselves for the sharpest annual rise in the cost of living since the early 1980s, there is no better time to teach kids about the importance of saving money and spending responsibly.”

We spoke to parenting experts about the best ways to explain the situation to children.

Talk openly – but keep it age-appropriate

It’s important to be honest and open about how things are costing more money, especially if your child has asked a question about it. Give them your full attention, and keep the answer age-appropriate.

Kate Featherstone-Coombes, a parenting expert and coach, comments: “This change of circumstances for many families is an opportunity to start talking about the value of money. I would talk to children about how things change in cycles and every challenge is a ‘right now challenge’. Today we can’t have ice cream but we can do this instead and another day we might be able to have ice-cream.”

However, take care not to overburden children with adult concerns. Jo Mitchelhill, a trauma coach to parents and families of childhood trauma, says children who are not emotionally equipped to handle the situation may “become anxious about food or losing their home, for example”.

If your son or daughter asks why Netflix is no longer on the TV, you could respond with something like, “We looked at how often we watched it and decided we don’t watch it enough to keep it”, or “They put their prices up, and we decided we didn’t want to pay the new price”.

If you have a teenager who is insisting on a new pair of expensive trainers, a conversation around saving for those things is key.

“Teaching children about budgets, even when there isn’t a cost of living squeeze, is important. It may be that the shoes are way out of budget and therefore the conversation could be, ‘those shoes are really too expensive. The alternatives are x, y and z’,” says Mitchelhill.

In terms of having a chat about any changes you’ve made to family life as a result of the rising cost of living, keep it simple and speak calmly. You don’t need to go into all the economic detail. Make the changes clear: perhaps you need to explain that you’ve cancelled the Disney+ subscription, you’re scrapping the Saturday night pizza takeaway or you’ll be staying at home this May half-term rather than going abroad. Or maybe you need to stress the importance of helping keep energy bills low, like turning off lights.

Once you’ve explained the changes, ask them how they feel. They may not have a big reaction, as they’re still processing the words. Remind them they are safe and everyone will be fine, and that they can ask questions whenever they want.

Make learning about money fun

For younger children, learning through play can be hugely helpful when you’re discussing a new situation.

Georgina Durrant, author of 100 Ways Your Child Can Learn Through Play, explains: “Play is how young children learn so there’s little point in sitting a very young child at the table and lecturing them about the rising cost of living, instead you could gently weave into their play some of the building blocks of understanding about money.

“Teaching them about coins, money, spending responsibly and making choices will be helpful for when a situation arrives where you might have to explain you can’t buy/do/watch something because it costs too much money, as they will understand what you mean by money and the idea that it can run out.”

Talk about the difference between “need” and “want”. Hill at GoHenry says: “It’s important for kids to understand that sometimes we have to spend money on things we need (like food and electricity) but not treats like the latest toy.

“This can be a tricky concept for younger kids to understand, so in those instances it’s helpful to explain how ‘needs’ like electricity impact their day-to-day life, such as how it makes the TV work or charges their tablet so they can watch their favourite shows.

“It’s all about educating them to understand that money isn’t limitless and we have to make sensible choices about spending.”

Get the kids involved in the weekly shopping trip to help them learn about budgeting. “Encourage older kids to unleash their inner Jamie Oliver with a fun ‘Supermarket Sweep’ style challenge where they select ingredients for a family meal within a certain budget,” says Hill.

“For younger kids, ask them to help you find the cheapest option on the shelf when looking for items like tinned tomatoes or pasta. You could even set a timer on your phone to really up the stakes!”

Use books to prompt conversations

Reading together can be a great way to have thoughtful, age-appropriate conversations about complex topics.

Amie Jones, founder of the subscription service Kind Kids Book Club and a mum to three young boys, says: “We have been making some cutbacks at home and found it really useful to talk about wants (all the nice things we would like to have) and needs (the basics we require to stay happy and healthy) when explaining about them.

“This discussion really helps to bring some perspective on consuming and spending and helps to remind children – and grown-ups – that we are actually very lucky to have the things we already have.”

Her top two book recommendations on this topic are The Invisible by Tom Percival and Today It’s A No Money Day by Kate Milner.

Other useful books that help teach kids about money include Save your Acorns by Robert Gardner and Grandpa’s Fortune Fables by Will Rainey.

Introduce pocket money

It may sound counter-intuitive at a time when you may be trying to rein in spending, but giving kids pocket money can teach them valuable life lessons such as budgeting and saving.

Kate Featherstone-Coombes says: “Introducing pocket money stops parents being responsible for buying all the things for their children and encourages their children to make choices of their own and be better informed of the impact of those money choices.”

According to parent consultant Kirsty Ketley, pocket money can be given from age 6, and can be as little as £1 a week. “You can be in charge of what the money is spent on – not on sweets for instance – but it is useful to let your child make decisions, so they learn if they are making good or bad decisions with their money,” says Ketley.