Swimmin' nekkid

Buffet is quoted as having said, "when the tide goes out, you see who's been swimming nekkid." You see who can't make ends meet anymore, with their credit cards cut off. You see who can't handle their mortgage payment and who can't handle their car payment. But, then again, you see who hasn't been swimming nekkid. You see who is keeping their house, keeping their car, quietly buying a little investment property, picking up some small luxuries and still not going bankrupt.

You start to see that the people buying generic groceries with coupons are paying cash, while the people buying the expensive brands of potato chips are using food stamps. You notice that the big-screen TVs are being loaded into couple-year-old boring cars, and the food bank is loading groceries into bimmers and Escalades. If you're smart, you notice that the geegaws of conspicuous consumption are dragging people underwater, while the sensible cars and total lack of bling that embarrassed people's kids a few years ago turn out to be tools for financial freedom.

I have tried to teach my nieces and nephews some basic finance lessons, like saving and avoiding debt. It has sometimes been hard to teach those lessons, when the kids don't see me as a financial guru or expert. People who know about money, they think, have enough of it to drive the Escalade and live in the the McMansion and wear designer clothes. I live in a totally mundane house, drive a mundane car - gosh, the kids think, if I knew anything about money, I would be able to afford better.

Which, of course, was exactly what I was trying to teach them. If I afforded better - usually on borrowed money - I wouldn't be able to build savings. Getting rich, without an inheritance, an incredibly lucrative career, or a lottery jackpot, is all about spending less than you earn. It's about plugging the budget when you start "leaking" money. It's about putting a little away, regularly, until it becomes more than just a little, and then investing it wisely so it can grow into a little something. But all those nekkid swimmers out there, living high on borrowed money, undermined that message - for my nieces and nephews and for the rest of the kids.

So maybe it's not such a bad thing that the tide is going out for a while. Young people's heads have been filled with lies about finance. They thought that people who spend a lot of money are "rich" while people who spend moderately - but actually save - are poor. "The Millionaire Next Door" showed that more millionaires are created on moderate incomes but high savings rates, than are created on generous incomes but luxurious lifestyles. Self-made Millionaires, it turned out, clip coupons and re-use ziploc baggies and they don't have to have NFL-star salaries to make themselves Millionaires.

If young people today, going out into a work force where pensions are no longer available, where life expectancies have grown faster than savings rates, where globalization means outsourcing crummy production jobs AND well-paid professional jobs, if those young people are going to have the luxury of financial security and freedom from extreme financial stress, they need to learn the spend-less-and-save philosophy (or else the tax-more-and-make-do-with-less philosophy).

When the people who only had credit are, well, discredited as financial experts, that's painful in the short-term but healthy in the long term. When savers get the goodies and over-stretched borrowers don't, it rewards responsible behavior and creates an incentive for other people to mimic responsible behavior. That's a good message for the kids.