B-Rant

- submitted by L. Keenan on 10/08/2008

  

Things We Lost in the Crash

By Linda Keenan

"What's a ecowomic kwisis, Mommy?" And with that question from my 4-year old, I knew this market-crazy Mommy was watching a bit too much CNBC. Actually, this question was a lot easier for me to answer than the one I got a few days before that (warning: partisan comment dead ahead!): "Why did John McCain pick Sa-wah Pay-win?"

That one stumped me, but as for the Great Ecowomic Kwisis of 2008, I explained to Frank that when the economy is bad, people lose a lot of money and lose their jobs. Then he said, "what's your job, Mommy?" I said, "taking care of you."

Like most of the rest of the world, Frank didn't seem to think of that as much of a job. But it is a job, one I can't be fired from, and a crucial part of it is trying to help my boy avoid the mistakes of the past. So I think of this as a primer that Frank can read in 20 years time, so that maybe he can avoid an ecowomic kwisis coming to his house, in some suburb of the future. And I begin with the house, the epicenter of this whole mess.

Wait Before You Buy

We all know at this point that we never should have viewed our houses as investments, that taking out home equity loans in hopes that our home values would grow was a foolish and, for some, a devastating decision. (Or, if you don't know that, I have a great house in central Florida to sell ya. It's a very very quiet neighborhood. In fact, it's deserted).

But one aspect of the home craze that got less attention is the now-entrenched idea that ownership is an indispensable part of early family life. Even before having children, I would see some couples purchase homes that they could barely afford, and barely afford to fill with furniture, because, well, that's just what people do, isn't it?

Ownership should not be viewed as a rite of passage. It should be something you get once you've saved enough money to make a healthy down-payment, and still have emergency cash to boot.

Change Your Lifestyle, Change Your Spending

Most every stay-at-home Mom I know in the suburbs used to work. And many of them waited to have children until their 30's. That's a lot of time to get used to a two-income lifestyle. While there are exceptions, of course, I have been amazed and troubled by the number of folks who don't seem to rein in their spending habits once they move to one income.

I also see a massive amount of money going to organized activities for kids even at very young ages. And single-income families are at great risk if an unexpected layoff occurs. That risk grows and grows the longer mom (or dad) is out of the workforce, because they generally become less desirable to employers.

The Wealth Mirage

I often get the feeling that people confuse stuff with wealth. Stuff doesn't mean you're wealthy. Money in the (FDIC-insured) bank means you're wealthy.

When you think about it, why is old money old? It's because whoever made it in the first place did not spend it. And it sat around for decades like a fine wine, slowly growing in value. An SUV doesn't rise in value. As we are finding now, houses don't always rise in value. And you can sure as hell forget that enormous flat-screen TV or fancy window treatments being worth anything either, if times get tough.

Sh*t Happens

One of the ideas I see people clinging to is that if you have the luxury of time, you have nothing to worry about, meaning that unless you are close to retirement, your house value long-term will eventually right itself, and so will stock prices.

You only need to look at the Nasdaq index to shatter that myth. In the spring of 2000, it was closing in on 5000. Now it's less than half that. How many more decades will it take to get back to 5000?

And even if it is true that prices will right themselves in the long-run, life doesn't move in a straight line from A to B. Over the past year, I've had friends in suburbia struggle with cancer diagnoses, a marriage break-up, a layoff, a business teetering on bankruptcy, a parent fallen on hard times and poor health. None of these things were expected, cash was needed, homes had to be sold.

That luxury of time was an illusion. Without a rainy-day fund, you could find yourselves suddenly strapped for cash, and forced to sell before your investments can pull off that turnaround.

It will be a long while before my son can understand all this, but last week I decided the time had come to start teaching him about money in a way he could understand. I set up a chore chart that lets him earn and spend his own money. He's ready to make his first real purchase: a ring pop. And he doesn't even need a home equity loan to buy it: cash on the barrel.

Linda Keenan is a contributing writer at Burbia. Linda worked 7 years as a head writer/senior producer for various programs on CNN. Before that she worked as a writer/producer for Bloomberg TV. She now writes satire, primarily about parenting culture, at Thoroughly Modern Mommy...read more rants