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It is important to teach them balance. If you have savings in the bank, nothing wrong with splurging everyonce in a while and I think it is healthy. If you are living paycheck to paycheck, you shouldn't even be going out to dinner!
You do realize though, if you have had a successful business in the last 20 years, it is because of those nonthrifty, spendaholics! Kind of a catch 22. Those of us with some money have that money because of them. Just food for thought.
Buying just because you think you want it now is something kids should be taught to resist. Buying because you need it, because the purchase down the road will cost more than a very good deal you find, or buying because it is a necessity should be taught. But even there with an eye to price and how much you need it now based on how much else you need that is more important. And how much money you have at that moment.
Absolutely discouraged should be charging because you can pay it next month (you hope) or someday. Especially if its expensive and you can't really come up with a reason to have it. Kids should learn not to used credit on things that they would not buy if they had to pay cash. Its pay now or pay much later and for three times the price. Something thats an impulse that your only buying since you don't have the cash is something that you don't need to be buying.
If money is tight or irregular, its even more stringent a matter. Kids need to ask twice and then consider somemore before spending. Lets say you go to a store and see a great "thing" that you must have. No, you shouldn't but want overcomes need and reason. But you tell yourself that you can always sell it.
Few months go by and the money is very short. You have utilitiy bills to pay and no money. Inflation may have shaved some of the value off of that cash you stashed, but while the thing is "worth" more its only such if you find someone who wants it and wants to pay that much. And you can't pay your electric bill with it.
You can always splurge when you have the money AND enough confidence that it will not be needed next month. But unless that, kids should learn frugality. Every kid is going to have this sudden thunk of reality where mom and dad are no longer supporting them and suddenly you can't have everything you want. Sometimes this lasts a long long time. We owe it to kids to have some clue on how to live with it.
In the big picture, nothing has changed. A stitch in time still saves nine, and saving up for a rainy day is still a good plan for all those who can manage it.
As for seemingly shocking evidence to the contrary appearing in recent newspaper headlines, it might be well to keep crisis things separate in one's mind from everyday things. During the Depression, FDR more less kept Treasury Secretary Morgenthau on board with plans for massive government spending by claiming that there were actually TWO budgets -- the normal one and the emergency one. The normal one was scrupulously balanced every year, and everything that tended to produce huge deficits went over into the emergency one that would of course be done away with once the emergency had passed.
That was perhaps a bit manipulative, but the underlying premise still stands. We didn't seek to bail out banks for our love of bank executives and their stockholders, but rather because without a functional banking system, the credit that drives economic activity will not be available to the economy as a whole. We didn't seek to bail out automakers on account of the wise decision-making of their management and stockholders, but rather because the sudden loss of as many as three million jobs associated with the auto industry would not currently be a good thing to add to an already large pile of problems confronting the economy as a whole. We do not look to revise the terms of some mortgages but not others because we find one group to be morally superior to another, but because failure to limit the tide of failing mortgage paper will do further serious damage to the economy as a whole.
No one actually likes the taste of any of the actions we are forced to take in seeking to mitigate the current crisis and hopefully hurry along the day of its eventual resolution. These actions are taken not out of delight, but out of realization that doing nothing is a far worse option, and that from the array of things that we might do, these are the ones that are most likely to have signficant effect. It would be nice if we could have a spoonful of sugar to help the medicine go down, but if we do not, then we will all just have to be big boys and girls and take it anyway...
Yesterday I was talking to a friend about the state of my 401K/IRA. Mind you this was money that I saved over more than 20 years of working, denying my self in order to fund my 401K to the max. Over the last 6 months I have seen this money shrink by more than 50%. Fortunately I also had other non IRA funds in bonds and CDs which while not paying any return they are atleast not shrinking. At 66, I'll get by, but I really feel like a fool though for trying to be a good little saver and follow the advice of all the advisers who tell you to save and invest.
Yesterday I was talking to a friend about the state of my 401K/IRA. Mind you this was money that I saved over more than 20 years of working, denying my self in order to fund my 401K to the max. Over the last 6 months I have seen this money shrink by more than 50%. Fortunately I also had other non IRA funds in bonds and CDs which while not paying any return they are atleast not shrinking. At 66, I'll get by, but I really feel like a fool though for trying to be a good little saver and follow the advice of all the advisers who tell you to save and invest.
Switching your 401K to an all cash option is what I would suggest. Munis and bonds are not going to be a good option either because the government is almost bankrupt. Cash will be king for years to come and I would just forget about "investing" all together for now. Sad but many people like yourself WILL not be able to retire on their investments.
Switching your 401K to an all cash option is what I would suggest. Munis and bonds are not going to be a good option either because the government is almost bankrupt. Cash will be king for years to come and I would just forget about "investing" all together for now. Sad but many people like yourself WILL not be able to retire on their investments.
This is exceptionally dumb advice. A better bet would be to realize that the losses on your 401-k are to date paper losses that you lock in only by transacting shares. Leave them alone to the extent that you can. There are no guarantys of the future, but there is a very good chance that stock assets will be worth more a ways down the road than they are today. Buy low, sell high. This is low.
This is exceptionally dumb advice. A better bet would be to realize that the losses on your 401-k are to date paper losses that you lock in only by transacting shares. Leave them alone to the extent that you can. There are no guarantys of the future, but there is a very good chance that stock assets will be worth more a ways down the road than they are today. Buy low, sell high. This is low.
This is definitely the tact that i am trying to take. But it doesn't make me feel any better seeing 20 years of frugality and hard work going down the drain while the grasshoppers are being bailed out.
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