Once-burned parents school their children on personal finances

Don Lee / Tribune Washington Bureau /

Lee Rousseau is drilling his 12-year-old daughter on the importance of saving — in a bowling alley in northwest Michigan.

Every Saturday, after Rachael finishes her three league games, Rousseau sits down with the seventh grader and calculates her allowance based on her scores. He adds dollars and cents for strikes and spares, deducts for gutter balls. And the rule is that she must sock half of it away.

“I want her to understand money and finances,” says the 48-year-old.

As he ruefully admits, those are subjects Rousseau himself came to understand almost too late. He's mired in debt — $25,000 in credit card balances, first and second mortgages on the family home, a $12,000 personal loan for a travel trailer. But he's determined that his daughter will do as he says, not as he's done. “I'm from the school of hard knocks,” he said.

Across America, the deep recession has taught harsh lessons to millions of families. In some, it has stirred a passionate determination that their children not make the mistakes they made — and to learn what the parents wish they'd learned as kids: how to manage spending and to save.

If those impulses persist and have their intended effect, the result could be a watershed moment with profound implications for the nation's future.

“It may be a harbinger of a kind of cultural shift,” says Eugene Steuerle, a senior fellow at the Urban Institute, a social and economic research institution. And for many families, he says, the change may be unavoidable: “It will be harder for households to borrow, so it will increase their savings rate.”

In the short term, concern over debt and job insecurities have slowed consumer spending and contributed to the still-anemic recovery from the recession.

But longer range, economists say, less spending and more savings will be a key requirement for a return of the enduring prosperity that Americans like Lee Rousseau had grown up considering their birthright. Besides increasing financial security, greater savings generates more private investments and will help soften the damage from the government's huge budget deficits.

“There were things we wanted now, so we bought on credit,” says Lisa Lanham, a Huntington Beach, Calif., homemaker who has three boys, ages 4, 11 and 19, and balances on six credit cards, five of which she has cut up.

Lanham is teaching her 11-year-old about what things cost, explaining even the sales tax rate in Orange County (currently 8.75 percent) so he can take that into account as he saves for the next big toy. “I tell him, you have to pay taxes on it,” she says. “He thinks it's stupid.”

Past studies have suggested that most American parents don't teach their children much about money management. And just how much the recession has changed that isn't clear yet. A survey last summer by the financial firm Credit One found that 80 percent of parents had not worked out a budget with their teenage children for back-to-school shopping. In 2005, that figure was 91 percent.

In a more recent poll for American Express, 71 percent of parents said their children, ages 6 to 16, understood that they were in a recession. And about half of the respondents said they were seizing the opportunity to teach their kids about finances, debt and good credit card use.

“We think there's going to be a lot of money talks taking place at the kitchen table this year,” said Pamela Codispoti, a senior vice president at American Express, which, like many bank-card firms, has been pushing the higher savings trend by reducing credit limits and the number of accounts.