The misery of living with atopic eczema (syn. dermatitis, AD) cannot be overstated for it may have a profoundly negative effect on the health‐related quality of life (HRQoL) of children and their family unit in many cases. As it is one of the commonest chronic relapsing childhood dermatosis (UK lifetime prevalence 16–20% by 20 years), with increasing worldwide prevalence, this has major social and financial implications for individuals, healthcare providers and society as a whole. This review explores the impact of AD on the lives of children and their family units and the use of some of the recently developed HRQoL measures, which have enabled investigation and categorisation of the physical, psychological and psycho‐social effects of childhood eczema across all aspects of life. These effects include symptoms of itching and soreness, which cause sleeplessness in over 60%. Sleep deprivation leads to tiredness, mood changes and impaired psychosocial functioning of the child and family, particularly at school and work. Embarrassment, comments, teasing and bullying frequently cause social isolation and may lead to depression or school avoidance. The child's lifestyle is often limited, particularly in respect to clothing, holidays, staying with friends, owning pets, swimming or the ability to play or do sports. Restriction of normal family life, difficulties with complicated treatment regimes and increased work in caring for a child with eczema lead to parental exhaustion and feelings of hopelessness, guilt, anger and depression. The hidden costs involved in eczema management can be significant and have particular impact on lower income families. The impairment of quality of life caused by childhood eczema has been shown to be greater than or equal to other common childhood diseases such as asthma and diabetes, emphasising the importance of eczema as a major chronic childhood disease. HRQoL measures are proving to be valuable tools for use in the clinical setting, as outcome measures for pharmaceutical studies, for health economics and audit purposes. It is therefore recommended that in future, they should be used in conjunction with objective measures of severity, as part of the assessment process of a child with atopic eczema. Lack of information on eczema and treatments heightens parental anxiety. Education of all individuals involved in the care of children with eczema is fundamental in the management of AD and it is essential to provide simple clear, unambiguous information on treatment and disease management in order to reduce the negative impact on HRQoL.