I read an interesting article in USA Today this morning about Campaign for a Commercial-Free Childhood and their campaign to have marketers cease marketing to children. Their concern is that marketing messages directed to children create “indirect demand” through the kids who then ask (or relentlessly pester) parents for the item. I applaud their efforts, but am skeptical that they will be successful, and certainly not in the short term.

They do bring up a real concern, though. One quote in the article is as follows: “Unfortunately, I will not be able to purchase many of the toys that my sons have asked for; we simply don’t have the money,” wrote Todd Helmkamp of Hudson, Ind. “By bombarding them with advertisements … you are placing parents like me in the unenviable position of having to tell our children that we can’t afford the toys you promote.”

Unenviable or not, it’s a message that many of us will be delivering this year. And although economic concerns may be more acute this year, I’d argue that this is a message that we should all get comfortable delivering. One of the central tenants of economics is that demand will always be positive at a zero price (for most normal goods), which is exactly what our kids perceive as the price-free. Without an understanding of scarcity and tradeoffs, they do what any “rational economic actor” should do: ask and ask and ask. After all, the product is free for them.

So how do we help them understand economic scarcity and tradeoffs?

When my son was very young, he’d ask for just about everything he saw in the store. To explain why I was telling him no, I would tell him: “We don’t have money for that.”. I thought this was a great approach until one day my son asked: “Dad, why are we poor?”

I thought about his question for a long time and decided that I needed to give him a much healthier explanation, so I’ve switched my approach. Now when he asks, I tell him that we have to spend money on things that will make us the happiest. Depending on the item (and my mood), I may give him a chance to argue why Item X will make us happier than buying something else. We’ll talk about tradeoffs such as going skiing or getting something else and sometimes he’ll make the tradeoffs himself. He often has $20 or so that he’s been saving and I’ll ask him if he’d like to spend his money on the item (funny how he understands economic scarcity with his money but not mine). Sometimes I’ll just tell him that I think we can find things to spend our money on that will make us happier and flat out tell him no.

Here’s what I try to convey with this approach:

• Spending is about tradeoffs
• Smart choices make us happier than dumb choices
• We have enough for things that are important, but not enough for things that aren’t
• We’re in charge of our spending and happiness

Since we’ve started talking in these terms, the discussions go a lot smoother. But sometimes I still just give a quick “no” and walk on past.

How do you tell your kids no?

Scott Crawford is CEO of DebtGoal.com, a do-it-yourself system for lowering your interest costs and getting out of debt. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.