Jobs Do Not Equal Security

The U.S. job market continues to flounder; when we do have growth, it's very weak. While this article suggests that the Japanese tsunami and earthquake may be partly to blame, the fact is that this is an ongoing weakness and the hallmark of a shaky economy.

No one is predicting that this problem will be solved anytime soon. Some believe it's a systemic problem with no easy answers. So our children will likely enter adulthood in an economy where the phrase "job security" is an oxymoron.

What can we do? We can raise entrepreneurial children who understand how to develop a side income, and help them become financially savvy so that they know how to stretch the dollars they earn. I cover those subjects in great depth in Thriving in the 21st Century: Preparing Our Children for the New Economic Reality.

The Supposed College Advantage, UK-Style

Over in Great Britain, college is pushed as the way to make more money, just as it is here in the U.S. This article is typical of the hype. What's really interesting, however, are the comments. People are finally realizing that in the new global economy, not everyone will need a college degree, and most people can't afford one.

Teaching Children to be Frugal: A Necessary Skill for the 21st Century

(excerpted from Thriving in the 21st Century: Preparing Our Children for the New Economic Reality)

‘Tis a Gift to Be Frugal

Good old Ben also praised frugality:

In short, the Way to Wealth, if you desire it, is as plain as the way to market. It depends chiefly on two Words, INDUSTRY and FRUGALITY: i.e. Waste neither Time nor Money, but make the best Use of both. He that gets all he can honestly, and saves all he gets (necessary Expences excepted) will certainly become RICH: If that Being who governs the World, to whom all should look for a Blessing on their honest Endeavors, doth not in his wise Providence otherwise determine.

You’ll give your children a great advantage by training them to be frugal. The word “frugal” has negative connotations for some people, but even 200 years ago, smart people like Benjamin Franklin knew that being frugal is an asset. Let’s clarify what frugal means: being careful with expenditures, not buying things you don’t really need, and taking care of what you do have. It doesn’t mean being cheap; in fact, people who only buy cheap goods usually end up spending more time and money replacing those cheap goods when they fall apart. A frugal person can recognize quality, and knows that a quality item lasts much longer than its “cheap” counterpart. (See “Teaching Children to Recognize and Appreciate Quality” on page 364.)

To be frugal is to be thrifty. Thrift was once considered a positive attribute, falling out of favor when America became a society of consumers in the mid-20th century. But there are still frugal people around; their thriftiness helped some of them become rich.

Billionaire investor and philanthropist Sir John Templeton and his wife began married life by living very frugally. They cut expenses as low as possible, bought used furniture (items no one else bid on) at auctions, and only ate at restaurants when they could eat dinner for 50 cents (this was during the 1930s). They did these things in order to stick to their goal of saving 50% of their income. In The Templeton Plan, co-author James Ellison explains,

The fact is, however, that John Templeton was not poor even then. He had a good income and a solid investment portfolio that was steadily growing. Some acquaintances might have regarded his approach to money, housing and the conveniences of life as somewhat eccentric, if not socially unacceptable. After all, the circles that Templeton, the investment counselor, frequented were characterized by big money, big houses, big cars, and big consumer spending in general. But Templeton was not one to live by society’s more superficial values. He followed his own inner dictates and his developing religious beliefs. footnote

And so a radical philosophy of thrift became a deeply rooted part of Templeton’s way of life. He became convinced that success was closely connected to saving, a belief that he has never stopped practicing.

Templeton was not the only wealthy person whose fortune was due in part to thrift. In his ground-breaking books based on his study of American millionaires, Dr. Thomas J. Stanley wrote that despite the stereotype of the free-spending, luxurious millionaire lifestyle we see portrayed in movies and television shows, many millionaires are actually very careful about how they spend money. They also use strategies such as clipping coupons, refinishing and repairing possessions instead of buying everything new, and buying in bulk. In The Millionaire Mind, Dr. Stanley noted:

People in my audiences often ask why a millionaire would clip coupons. It’s not just to save fifty cents today—it’s how much can be saved and invested over a lifetime. The typical affluent family in America spends over $200 a week for food and household supplies. That’s more than $10,000 per year. During an adult lifetime in current dollars, it translates to between $400,000 and $600,000. If you cut off just 5 percent of this amount, between $20,000 and $30,000, and invest it in a top-ranked equity fund, given the rate of return during the past few years the amount earned would have been $500,000. (96)

I’m not suggesting that all or even many of our children will become wealthy by being frugal (though if you teach your child to be frugal and he grows up to be a millionaire, he’ll handle the money better than most would). But the frugal millionaires Stanley studied illustrate the wisdom of being frugal and investing the money saved by being that way.

Teaching frugality to our children will benefit them once they’re grown up and making their way in the global economy. They’ll learn to live simply, thus experiencing less financial stress in the future. In a world where they’ll often be between jobs, frugality could make the difference between financial stability and financial trouble. As writer Charles Jaffe once said, “It’s not your salary that makes you rich, it’s your spending habits.”

Real Wages Are Down

So we're off to a shaky start in 2011, with real wages down .5% last month. Actual wages remained the same, but thanks to inflation, higher consumer costs resulted in a decrease in real wages.

Two reminders here: wages are not increasing as they once were, and inflation is making it harder for people to stretch their dollars. This is why it's so important that we raise kids with money smarts. It's a life skill that's becoming more necessary all the time.

Book Update

Thriving in the 21st Century: Preparing Our Children For The New Economic Reality is at the printer; we're awaiting the delivery of proof copies this week. The book will be out in April!

Newbies to this site may not know that I began investigating the changes in the economy several years ago, when my husband's manufacturing-related business began slowing down due to increasing competition in his industry from China. Once I realized how much the economy was changing, I began to study how to prepare our children for a very different world of work than the one my generation had known; my study led me to write this book.

Here's the back cover copy for Thriving in the 21st Century:

Today’s children will reach adulthood in an economic environment unlike anything the world has ever seen. The 21st century global economy is powered by an increasing rate of technological change as well as growing foreign competition; both are contributing to the high U.S. unemployment rate and stagnating American wages. How can we as parents prepare our children for success in this growing maelstrom that many are now calling “the new normal”?

In Thriving in the 21st Century, Barbara Frank demonstrates that we must move beyond the common wisdom of the 20th century that emphasized a college diploma and lifelong employment with a large company as the only way to success. Instead, we need to set our children on a new path, one that will help them not just survive, but thrive in the 21st century.

In this book, you’ll learn:

• The Seven Strengths your child will need to prosper in the 21st century, why they’re needed and how you can develop them in your children
• The most efficient (and increasingly popular) way to give your child those Seven Strengths
• Why public education has failed to prepare our children for the 21st century
• How we can help our children become the lifelong learners needed in a rapidly changing global economy
• The surprising truth about today’s colleges and universities
• How economic change is affecting a variety of career areas, and which of them are projected to grow dramatically in the coming years.

This book is packed with ideas and resources for raising our children to become adults who respond proactively when faced with economic challenges, and who can prosper during times of great change. We can help our children reach young adulthood ready and able to tackle the future with all its challenges. And that, of course, is the key: we must prepare our children for the future…not the past.

I'll share more information as it becomes available. Keep an eye on this site!

Less Work for More People?

Across the pond, 97% of recently created jobs were part-time jobs. Here in the U.S. we're seeing a decrease in working hours, too, although not that extreme. Not yet, anyway.

Some believe this is just the beginning. Years ago, Jeremy Rifkin's The End of Work predicted this would happen. No one knows for sure what the future holds, but playing it safe seems prudent. If we teach our kids to handle money wisely and carefully, they'll be able to handle life on a small salary better than those who aren't taught to stretch a buck.

Living the Good Life

Over the course of researching my new book, Thriving in the 21st Century, I sometimes got depressed when seeing all the indications that our kids will have to live very frugally in order to make it financially.

Don't get me wrong, I'm pretty frugal myself, but it's a choice I've made. I don't like to think my kids may be forced to live that way.

This interview with John Robbins is a great reminder that the attitude we take when we teach our kids to be money-smart is all important. Robbins' father was one of the original owners of Baskin-Robbins, and extremely wealthy. When he was a young man, Robbins chose to strike out on his own, renouncing his monetary inheritance and living very simply. He describes all the good things that happened because of that decision in his recent book, The New Good Life.

If we can raise our kids to live simply and be happy about it, we will have given them a great gift.

Will Your Kids Earn Less Than You Do?

As we American workers compete in a global economy, it's only logical that wages will go down. After all, if your job pays $25 an hour and your competition in China is paid 32 cents an hour, you're eventually going to meet somewhere in the middle, which for you means your hourly wage will go down. It's happening already. Many people have seen their pay decrease, sometimes dramatically, over the past few years.

This means there's a good chance that your kids will someday make less than you do now. I could be wrong. But if you teach them how to handle money wisely and how to stretch a buck, they'll be prepared to handle low wages; if I'm wrong and they end up making high wages, they'll be able to save up a nice nest egg to take care of you in your old age.  :)

Why You've Got to Teach Your Kids About Money

Money's tight for many people these days; even those who have good, well-paying jobs or businesses should be socking away money in case their fortunes change. This is a smart thing to do, and one reason why you'll want to teach your children to handle money wisely before they leave home.

Another good reason is that many companies are now running credit checks on their prospective employees. Some, like this woman, cannot find a job because, within a few months of losing her last job, she ran out of money to make her house payment and went into foreclosure. Now she can't save her house unless she gets a job, and she can't get a job because of her house.

Don't let your kids be caught in a Catch-22 situation like that someday.

Help Your Teen Understand the Enormous Federal Debt

Most of us don’t understand the extent of our government’s indebtedness, but we do know that we’re saddling our kids and grandchildren with a ton of debt. No one’s happy about that, but what can we do?

Here’s an interesting interactive graphic that will help you and your teen get a handle on exactly what can be done to reduce deficits. It’ll get you both talking about where cuts should be made and/or taxes should be increased. Each decision you make reduces the debt….but also has repercussions.

Try it and see what I mean. It will help your teen (and you) understand what kind of tough decisions need to be made to get us back on track.

Underemployed College Grads: There are LOTS of Them

It's been a long time since most people went to college solely for the purpose of expanding their minds. In recent years, it's been all about getting that degree so you can get a good job. Colleges and universities didn't disagree with this view; in fact, many emphasized it by bragging on each graduating class's employment rate.

But the stakes are higher now: students graduate with tens of thousands of dollars of debt, and they expect a way to pay it back so they can get on with their lives----and with earning a decent living.

That's why this article in The Chronicle of Higher Education, "Why Did 17 Million Students Go To College?" is so striking. The author points out that, according to the Bureau of Labor Statistics, there are 17 million college grads employed in jobs that don't require a college degree. Hmm, how are they going to pay back all that student debt on a lower salary than they'd planned to earn?

The Truth About Unemployment

According to government statistics and recent polling, the U.S. unemployment rate currently hovers at around 10%.

But economist John Williams includes both the short-term and long-term discouraged workers in his statistics, and estimates the current unemployment rate to be over 20%. Who's right? It doesn't matter; 20%+ is awful, but 10% is nothing to brag about.

Many pundits tell us this is "the new normal." If they're right, we'd better get started teaching our kids how to stretch a buck so that they can get through bouts of unemployment without going hungry.

Even on Wall Street....

....salaries are shrinking. Learning to stretch a dollar is going to become a very popular pastime. Will your kids know how to live simply and stretch a buck?

How Did This Happen?

You may wonder how our economy got to the point where it is now. I think Charles Hugh Smith summarizes it pretty well.

The middle class filled the growing gap between stagnant earnings and steep increases in living costs, healthcare (a.k.a. sickcare), education, and housing with a second income (Mom, aunty, sister and Grandma all entered the workforce en masse) during the 1970s, and then they filled the still-widening gap in the 80s, 90s and 2000s with ever-expanding debt.

The dot-com bubble provided the illusion that permanently rising equities would painlessly fill the gap (pension plans were happy to join in the mass delusion). When that fantasy imploded, it was quickly replaced with the exact same fantasy, only this time based on housing.

Hence our current economic troubles. The bottom line? Our children's future will be much different from the world we've been accustomed to for the past 30 years. It will be harder for many people to earn money. Our kids are going to need a variety of skills, not just a sheepskin.

Incomes Headed Down

New demographic data shows that U.S. median income dropped nearly 3% from 2008 to 2009. Given the rise in unemployment since then, it's likely that the 2009-2010 change will be at least the same and maybe higher.

Incomes are headed down. Finding any job, much less a higher-paying one, is not easy these days. It's a helpless feeling, but we're not helpless. We do have the power to manage our money wisely and stretch every dollar we earn.

We must also teach our children to do the same. It's their best bet for surviving economic difficulties in their lives someday.

Raising Entrepreneurial Kids

Is it true that entrepreneurs are made, not born? No one knows for sure, but giving your kids opportunities to work for themselves is a great way to prepare them for the 21st century economy. Having their own business (even if it's just a side business) will be a good way to stay afloat financially.

Today's New York Times has an interesting article called "How to Raise a Business Owner." It's written by a self-employed mom. Check it out HERE.

Courting Financial Disaster to Create College Grads

According to a new study (ironically initiated in part by Sallie Mae, the government entity that holds most student loans), parents are at risk of impoverishing themselves in order to make sure they send their students to college.

It's not until the end of this long article highlighting the survey's results that the reporter states the obvious:

Although most students believe they need a college degree to earn more money and work in their chosen field, some are beginning to question whether an education is worth the hefty price tag. Only a slight majority -- 53 percent -- of those surveyed in 2010 feel college is worth the cost; 62 percent thought a degree was worth it in 2008.

At least some students are starting to catch on.

Will Your Kids Be Able to Live on Less Than $50K a Year?

This article asks if it's possible to live on an average income of $50,000 a year. Considering that wages have been stagnating for years (when you consider inflation) and are now dropping, it's possible our kids will have to live on less than $50,000 annually.

Will your kids be able to do it? Have you taught them to handle money wisely? If not, why not?

Kids Need to Learn to Handle Money Responsibly

We're seeing so many stories of people in financial turmoil, and we're told that this is the new normal. Not for my kids! Teaching them how to handle money is one way to prepare them for the future.

Here's a site that offers plenty of lessons about money for your children. Check it out!

Teach Your Daughters Well

Having money skills will be a key to financial survival in the 21st century, so it's important for parents to teach their children how to handle money now, while they have them at home.

Traditionally, girls were often left out of these discussions. Even today, some parents don't think about giving their daughters the advantage of having financial savvy. But given that single moms have taken a real financial beating in this economy, every girl should be taught how to handle money wisely.