Children learn to lasso that money

Even before the stock market roller coaster and bailout crisis, Kim Maksymuik and her husband began trimming expenses and giving their 5-year-old twins gentle lessons in what is most important. "We understand that things in life change, and we need to be financially prepared for even the worst situations," she says.

As part of their quiet belt-tightening, they eat out less frequently. They go to the library instead of the bookstore. "Many times this is better as there are many free activities at the library," says Mrs. Maksymuik of Tampa, Fla. The family sells old toys and clothes at garage sales or resale shops. Maksymuik also shops at resale stores, noting that clothes often carry the original tags.

In a faltering economy, many families are taking similar steps to shift their priorities and educate children. For some it is a necessity, resulting from a pink slip or foreclosure. For others it is a precaution, a way to save and an opportunity to talk about money – often a taboo subject in families.

"The big lesson both adults and children have to learn from the financial crisis is about values," says Dorothea Hover-Kramer, a family therapist in Port Angeles, Wash. "What really matters in a world of uncertainty? Children can do very well on less. It was an illusion with which parents fooled themselves to think every child needed designer-label clothes and fancy toys. Kids are much more flexible than most adults want to know."

How parents convey these messages can determine whether children feel deprived or content with what they have. "Take this time to assure your children that you are there to protect and take care of them," says Lori Mackey, a creator of financial education products for children. "My suggestion is to not create fear and insecurity around this situation, but look for solutions on how you can teach your children better habits."

Katherine Harms of Baltimore cautions against being too open. "Families who make speeches about all the cutting back and doing without make it a lot harder for their children than it has to be," she says. "We certainly need to be honest with children who are old enough to grasp the realities. Probably the most important thing children need to know, a lesson my parents urged on me, is to use every gift to its fullest. Children grow accustomed to replacing 'obsolete' and 'out-of-style' possessions."

For some children, lessons in economizing start early. "I just had a talk with my 9- and 4-year-olds about living on less," says Stephanie Ochoa of San Antonio. "At the supermarket, while they each left with two snacks, they did not get everything they hoped for. They started crying. I went home and told them that because the cost of gas went up, the cost of food went up, and we really needed to cut down on extras. Overall, they seemed to understand that it is not just us who have to plan our trips, watch our gas mileage, and cut back on extras. The whole country is having to do it."

In Austin, Texas, Michelle Hamilton's two young sons are also learning about money. "They watch Bloomberg with us in the morning, and we are teaching them about the stock and commodities markets," she says. "We strive to teach them about real assets and explain needs versus wants."

Last month the Hamiltons even watched "The Grapes of Wrath." "We emphasized that a fancy home and stuff are not important," she says. "The family is what matters, and we need to be good to each other and support one another during these hard times."

For teenagers, cutting back is not always easy. Bill Horne of Sharon, Mass., the father of an 18-year-old son, says, "We are adamant about not buying designer clothes and shoes. Although this has caused a lot of friction, he has accepted it as he has grown, and now routinely looks for stylish clothes at yard sales and charity stores."

Linsey Knerl, a senior writer for Wise Bread, a personal finance and frugal-living forum, discusses money quite openly with her four children. "Share your situation in a general way," she says. "It's OK to tell Tommy or Susie that there isn't enough money this month for a new pair of Heelys or for the latest Wii game."

Mrs. Knerl advises parents to enlist children's help. That includes letting them plan inexpensive meals, giving them coupons to cut, and taking them shopping. "Just like adults, children feel less anxiety over a situation when there is something they can do," she says.

Some parents emphasize the importance of reaching out to others. Last month, to help people displaced by hurricane Ike, each member of Nettie Hartsock's family in San Marcos, Texas, contributed $10, the price of a movie. They bought two bags of canned goods and took them to the food bank. "My husband and I told our children that it's always good to remember that there are people in need, and we can help them out no matter what," Mrs. Hartsock says. "Missing a movie is much less important in the scheme of things than missing a meal."

Maksymuik calls volunteering one of her children's favorite activities. "We volunteer at the food bank, we pick up garbage to keep the earth beautiful and healthy, and we help out at the local humane society," she says.

In similar vein, Nicole Ravlin of Burlington, Vt., created Vermont Toy Share, a toy swap to be held the weekend before Thanksgiving.

"Many Vermonters are concerned about how they will heat their homes and feed their families this winter," she says. "Holiday gifts may be smaller or non-existent. This event will allow them to get new 'gently used' toys for their children."

Explaining that she has asked her 4-year-old son to donate five toys, Mrs. Ravlin says, "He knows we will be swapping toys with others for Christmas this year."

Whatever approach parents take, Ms. Mackey says, "You are not depriving your child of anything if you stop spending money. You will actually be teaching your children valuable lessons. When you learn how to live with less, it teaches you the value of what you do have."