What the Economic Crisis can Teach the Kids

The kids can learn some valuable lessons from the grownups' financial foibles.

The financial storm of 2008 is all over the news, and bleeding into advertising spots.  Jokes about subprime derivatives should start popping up in sitcoms before too long.

You're not the only one watching. This could be the best chance you'll ever get to teach your kids some financial sense.

Gimme credit!

The next time your teenager asks for her own credit card, sit down and explain how it works. Charging every purchase to plastic may feel good in the moment, but afterwards, she'll have to deal with interest charges, possible late fees, and a damaged credit report if it all goes horribly wrong. A responsible adult can use credit cards for good rather than evil, but you better make sure that the kids understand the difference before they copy, on a smaller scale, the debt management mistakes of investment banks.

I want it now!

"Save" is a four-letter word. Instant gratification at any cost sounds much better.

The next time that your 8-year old points to a TV commercial and shouts "I want that," it's time for another lesson. Tell her that it's okay with you if she gets that video game, but she'll need to save for it. Introduce her to the concept of weekly or monthly pocket money, and explain that anything she wants is worth waiting and saving for. Besides giving her a means to fulfill those materialistic desires through patience and penny-pinching, it's a valuable lesson in self-control and dealing with peer pressure. Do this as soon as you think your youngster understands the difference between a one-dollar bill and a twenty.

Thinking too big

Maybe you can give each of your kids a room of her own, but only by moving into a six-bedroom mansion at the very top of your budget range. If you don't explain the tradeoffs you're making in a deal like that, the kids will wise up when mom and dad take second jobs to cover the bigger bills of a bigger lifestyle.  It's probably better to do this with a whiteboard and calculator rather than unplanned overtime shifts and three overstretched paychecks.

Who's paying for this?

A $750 billion government bailout is obviously a big deal...but do your children know that they'll have to pay for it? Grandpa gets a retirement check every month...where does it come from? Who foots the bill for paving our roads and building schools? Maybe they teach some of this in elementary school today, but you can never be sure. Instilling a sense of how money flows through a modern society will help you drive home the other lessons about personal finance, the larger economy, and saving habits.

Kids and savings go together like oil and water, but it's never too early or too late to start teaching them about saving. Use the banking crisis as a starting point, and your family will do fine for generations to come.