Don't Be This Family

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You know the litany of America's economic worries by now. Gas, milk, health care, groceries -- everything is more expensive. Home prices are falling. Everyone feels like they need to spend more to get less.

In such a situation, it makes sense to reconsider your financial security -- where you are, where you'd like to be, what you might have to do to get there. What you don't want is for any of this to come as a total and complete shock, especially for your kids.

A recent Washington Post story highlighted a family in the midst of some belt-tightening. "In Potomac Falls," writer Donna St. George relates, "two parents adopt a household budget, but the idea is startling to their daughter. 'Oh my God, are we poor?' the teenager asks her mother."

First of all, good on this family for adopting a budget -- it's the essential first step toward lasting financial wellness. And it's not surprising that their 13-year-old doesn't know a whole lot about the family finances; many parents don't share these details with their children. But it's still too bad that the concept of budgeting is so surprising to this teen.

"Budget" is a scary word to far too many Americans, but it shouldn't be. All a budget does is ensure your money works for you in the ways you want it to. Think of it as a "spending plan" or a "magic pony savings fund" rather than a budget, if you like, but don't think it's only for poor people. It's possible to live above your means no matter how much money you make -- look at MC Hammer.

Budgeting is an essential component of money management for everybody -- rich, poor, or in between. It doesn't mean deprivation (really, truly); it means common sense. It's possible for a budget to contain hundreds or thousands of dollars a month in fun, frivolous purchases. All the budget does is make sure that all your financial goals, fun included, stay met.

The kid in the story, who's 13, admits rather sheepishly that she's "kind of used to getting what I want." I'm sure she's a good kid, but her statement brings up the point: Today's kids are tomorrow's grown-ups, with tomorrow's car loans, tomorrow's mortgages, and tomorrow's credit-card debt -- or tomorrow's 401(k)s, fully funded Roths, and high-interest savings accounts. A kid who's "kind of used to getting what [she] want[s]" is going to find it hard to break that instant-gratification habit in adulthood, even when Mom and Dad can't or won't foot the bill anymore. There are a lot of unnecessary financial mistakes lying in wait down that path.

Don't wait until times are lean to start keeping tabs on your money. It's always a good idea to know where it's going, so you can be sure it's doing all it can to help you achieve your goals. And if you have kids, get them involved in the process; you don't have to tell them every detail of how much Mommy and Daddy make, but helping them learn to budget with an allowance or a savings account, for example, can do wonders for their long-term financial health.

At the Fool, we've recently renewed our commitment to financial literacy for people of all ages, but especially for young people. Join us over at Foolanthropy to find out more about our quest to make sure everyone gets a solid financial education. You can check your budget fears at the door.