Family Finance 101

As we head into one of the worst economic downturns in a generation, how will the most privileged class of U.S. citizens—our children—deal with the fallout?

With all too many Gen Xers, Yers, and Zers having been raised under the Divine Right of the Cell Phone, the car at age 16, and $100 pairs of jeans, how does a family cut back when parents are often quite bad at saying “no” to their children? If you’re going to make the best of this teaching moment, children will need to trim their spending, too.

“Baby boomers in particular really want to protect their children because they were raised by Depression-era parents,” says Ruth Hayden, a St. Paul financial counselor. “Many of us were brought up by parents who clipped coupons and saved those little twisty-tie things. We don’t want that for our kids, and try to give them a lot more.” The author of four books, including Your Money Life: The “Make-It-Work” Workbook, Hayden spends her days helping individuals and couples manage their cash and deal with daily money issues.

Lessons for Kids and Parents

To be sure, many parents are responsible educators when it comes to teaching their children about money. They nudge them toward getting jobs, establishing budgets, and setting limits on spending. But “the land of plenty” has produced an abundance of goods, services, and consumer experiences for our children: traveling hockey teams, limos to prom, manicures and pedicures for teenagers, and mountains of toys for younger kids. Our social mores have changed from frugality and thrift to extravagance and indulgence. As a result, we’ve cranked up the amount of money we spend on our children.

“The things we buy for our children are getting more expensive and elaborate,” Hayden says, adding that all too often her clients haven’t developed a clear money management philosophy that extends to their children.

Yet the current economic crunch has forced many families to significantly trim back on their spending by eating fewer meals out, going to fewer movies, and deferring major purchases, such as buying a new car.

“I think there’s a silver lining in what we’re being exposed to by the broader economy,” Hayden says. “It’s almost as if this kind of economy can give parents the excuse to take something back.”

Put another way: As times get tough—with thousands of working parents worrying about job security or having already lost their jobs—parents need to recognize that they have to make their children, young and old, part of the solution, not just part of the problem.