Recently in Economics Category

1. This is where you will (not can) save any money you come across (birthday, holiday, etc.).

2. Once you put money into the little blue book you really do not want to take it out.

3. The bank will give you some money in return for keeping a little blue book full of money.

The lesson above was very simplistic; namely, that saving is good and should be taken seriously.  Beyond setting up a savings account for me, my parents also exposed me to their financial goings-on from a very early age (I knew for example how much my father made via his paycheck, what our tenants would pay in rent each month, and how much my dad would collect for small handy-man type projects).  My parents hid nothing about our financial life or status, so I was "in the know" from a very early age.  Some experts have argued, especially in light of the recent recession, that parents should aim to shelter financial goings on from their kids given stress, anxiety, etc.  And while every parents should customize parental advice for his or her child (read: understand what type of child you have and adjust parents style), I believe in empowering children and raising smart, pragmatic, kids who will be ready to face the world!

So, when beginning your child's fiscal eduction you want to make sure you do the following:

1. Set up a savings account and describe what it is meant for and how you make regular deposits.

2. Expose your child to every inch of your family's financial life (in a sense treat the child as an adult and describe how much money the family makes <and the different sources of money>, what the family does with money, and what money can and cannot provide).

Start the personal finance discussion slowly and make it as easy to digest as possible.  That is to say, talk about saving money and not interest rates or how money is needed for a home, food, and security and not to buy video games, go out to eat, or impress people.  

I know of some families that never discuss money matters and this can be potentially dangerous to a child's personal finance eduction (which isn't taught in schools, unfortunately, and is the responsibility of the parent).  Money is not a dirty word nor should parents treat it as formal topic only open to adults.  The sooner a child feels comfortable dealing with money the quicker he/she can begin to see the value of money what it can and cannot provide an individual (security versus happiness, for example).  

My parents emigrated from Italy in the early to mid 1970's.  My father has the equivalent of a technical high school education and my mother finished her formal education in the 7th grade.  Yet my parents are one of the most financially savvy couples I know, often making smarter economic decisions then their US-born Boomer peers (with BAs and Master's Degrees in hand).  How do they do it, here's a quick list:

• My parents spend much less then they make and live below their means. 
• My parents do not eat out regularly, go to the movies, or buy fancy cars.
• My parents are incredibly crafty and skilled: they can make their own home repairs, make their own food (including food from scratch and canned tomato sauce, pickled vegetables, homemade pasta, homemade wine, etc.), iron and repair their clothes, grow their own fruits and vegetables, landscape, etc.
• My parents are always saving
• My parents are not slaves to their paycheck, they have other forms of income.
• My parents own a two-family home and are landlords
• My parents do not panic and are level-headed about financial decisions and the economy, in general.
• My parents own a single car
• My parents live in a solid, blue collar, middle class neighborhood, in a comfortable but mid-sized home.
• My parents do not feel a sense of entitlement from a material perspective. 

Mom and Dad also have their financial house in order because they realize that life is about being fulfilled and fulfillment doesn't come via a big screen TV or a fancy vacation home, it comes by way of:

• Being with family and friends (my parents social network is very larger and they're always out visiting people or having folks over for dinner or espresso).
• Traveling and vacationing in smart ways (my parents visit their families in Italy every summer and they don't pay for restaurants, hotel, or souvenirs).
• Helping their immediate family (kids, brothers, fathers, etc.) with home renovation, home health care, decision making, etc.

So, if you're looking for your own personal finance bail out program just look at the habits of folks who didn't start with much and had to build wealth on their own terms.

"There's a choice we're making we're saving our own lives. It's true we'll make a better day just you and me"

I think it's time Wall Street gets together and records its own version of We Are the World, maybe something along the lines of "We Are the Capitalists".

Seriously, folks, have a listen to the original 1985 recording and it will make you feel warm and tingly all over, regardless of your bank's share price.

Thanks to Danya's RuttenBerg's blog for pointing out that there are alternatives to asking US taxpayers for 700 Billion dollars; here's an interesting position/plan from Senator Bernie Sander's (Vermont).

Also, are you wondering how we got into this whole banking/mortgage mess?  Read about the history of deregulatioin starting in the early 1980's.

The current political and financial scene in Washington and New York could not be unfolding in a more dramatic fashion.  Key congressional leaders, the President, McCain, Obama, and Secretary Paulson met late into the evening yesterday only to walk away with no deal to rescue US banks and the ailing markets.  Click here for a brilliant account of the events via Stolberg of the New York Times.

Meanwhile, the US Government seized control of Washington Mutual and sold parts of it to JP Morgan Chase.

This is high drama with tons at stake, folks!

Bo Lundgren, ex Swedish Finance Minister, knows how to fix economic problems.   And now he's teaching the US government how to fix its current crisis.  Lundgren was Finance Minister during the Swedish banking crisis of the early 1990's and the solution, at the time, was easy: big government intervention in the form of cash and (part) government ownership of ailing banks.  Call it fiscal socialism or whatever you'd like, but the policy worked and the same sort of intervention is needed in the US.  

So if government intervention is a strong given in the current US environment (as Fed Reserve Chairman Ben Bernanke stated), then the real question on the table is the level of help or involvement.  Here's what Sweden did during their crisis:

Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today's dollars, to rescue ailing banks. That is slightly less, proportionate to the national economy, than the $700 billion, or roughly 5 percent of gross domestic product, that the Bush administration estimates its own move will cost in the United States.

US Senators, from both parties however, are hesitant to give Bush's administration the $700 billion needed to rescue the banking sector - reasoning more along political lines then economic lines (that's a problem).  Stay tuned to see how the bailout unfolds...