The basic tenet of money management is: Don’t spend what you don’t have. As the current debt-driven financial debacle demonstrates, as a nation we have gotten away from that simple concept.

Unfortunately, we’ve taught our next generation to emulate our bad habits.
 
I still remember bursting into tears when I proudly told my Grandpa Bill that I just qualified for my first mortgage. “Are you crazy?” he responded. “As long as you borrow money, you don’t own that house, the bank does.”

Grandpa Bill lived through the Depression, and along with lots of Americans, lost everything. I didn’t quite listen to Grandpa Bill – neither have a lot of us – as we are still not setting great examples for our kids.

We are a nation of spenders - not savers. According to the Federal Reserve, the national savings rate fell from a positive 8%, to in the early 1990’s a negative rate for a while , and now is at almost nothing. Simultaneously, the average household’s debt is nearly doubled.

The scary part is that since 2000, the largest drop in the savings rate is among 25-to-34-  year-olds.

Now, overlay the creative credit products that appeared and “hid” the true risk that was involved. The financial world encouraged millions of borrowers to go into real estate and created what some have called “Phantom Wealth” in our economy.

Next: What To Teach Your Kids