"No, we can't afford it."

If you are a parent, that sentence might seem familiar to you. It's usually said by the parent after one of their kids ask for something like an XBox or an IPhone or something else that would otherwise break the household budget. At my house, the source of contention has been my 13-year-old son's desire to have a parrot or some other kind of bird. Not only do I not want the added expense of bringing another animal into a house that already resembles Noah's Ark, but I just don't want a bird screeching in my house all hours of the day and night.

It was a similar conversation that I had with my oldest son a few years ago that didn't totally eliminate the request for high-ticket items, but made him understand more fully WHY we couldn't spend money on some of the things he wanted.

My oldest son, when he was around the age of 15 or 16, asked for money quite often (this was prior to him getting his own job at a local grocery store). He always needed money for something...concert tickets, WWE wrestling tickets, CDs, etc. He always had his hand out for more and more money. For a time, it seemed as though I was paying for all of his dates as well. The amount of money he was asking for was quickly outstripping the $20 weekly allowance I was paying him for doing chores around the house.

I had used the throwaway line "I can't afford it" with him one time too many one day when he replied with "well, WHY can't we afford any of this stuff?" It was at that point that I decided to show him.

I sat down with my son at the kitchen table and placed my checkbook in front of him. I also had a calculator. This was at a point in my life when I was trying to eliminate massive amounts of debt, and money was tight. Just a year earlier, we were worried about having a place to live. Buying an XBox was an extremely low priority.

I told my son how much my paychecks totalled each month. I even showed him my pay stubs. I told him to enter that amount on a calculator. I then read off the amounts of our bills and had him subtract those amounts from our income. He punched in numbers as I read the amounts of rent, gas, electric, cable, phone, savings, prescription drugs, doctor bills...every expense that our household incurred every single month. When we were done, I told him to look at the number that was left.

"Well, there is about $200 left over. That's plenty." he said.

I then reminded him that the $200 was actually divided by two pay periods, so that's actually $100 in miscellaneous money every two weeks. That money was usually used to pay for unexpected expenses like school supplies if he ran out, extra gasoline if the price went up, etc. Our wiggle room at that time was $50 per week. The amount of money he routinely asked for each week greatly exceeded that amount. Whe my son saw that number, I could see the lights go on in his head.

Shortly after that conversation, he took a part-time job bagging groceries at a supermarket a couple of blocks from where we lived. I got him into the habit of saving 20 percent of each of his checks for college. He could do what he wanted withe rest, including saving additional amounts of money.

The purpose of my conversation with my son wasn't to shame him into not asking for money anymore. I still gave him an allowance for doing chores around the house, but he realized that if he wanted something that cost more than the household budget allowed, he would have to save for it. Of course, you can't have a conversation like this with a 7-year-old kid, but you should start teaching kids about how to handle money starting at a point when they are asking you to buy things.

Give the kids an allowance each week, but make them work for it. If they want a video game or something that is valuable to them, teach them the value of saving for it. Children today are growing up at a time in which they expect instant gratification. I am convinced that is why so many young adults are having problems managing their money. They still expect instant gratification, and they never grew out of it.

As your child gets a bit older, buy them a reloadable pre-paid credit card. Put about $20 on it and tell them it is for emergencies or unexpected expenses only. If they spend any money from it, they must pay off the balance in full at the end of each month. This will help prepare them for managing their plastic when and if they get real credit cards at an older age.

When times were really tough for my family, my kids knew we were having money problems. They could hear my wife and I argue about bills and money on several occasions. That was during my former life...when I didn't manage my money and instead let it manage me. If I could go back in time and do it over again, I would have let my children know a bit more about our financial situation, assured them we were working on fixing it (which we were, and did) and explained a bit more about why we couldn't buy certain things intead of just saying "we can't afford it." There is no need to tell your children EVERYTHING about your finances, but giving them a good overview and appreciation of what things cost is effective.

You don't want to frighten your children, but you do want them to know what things cost, and how that affects you. For example, I told my oldest son how much I averaged per hour in salary, and how many hours I had to work to purchase certain things. It was a real eye-opener for him when I explained I had to work almost a full week out of the month just to pay for rent for our apartment.

We always want to protect our children, and too often we think that means shielding them from the truth. By sharing more about your financial situation and how that affects them, they become more informed not only about where the family stands financially, but about how to manage their own finances as well.

Savvy Frugality Recommended Reading: 10 Ways to Save Money in 2009

My wife and I have been married for nearly 19 years. During most of our years together, we have been a two-income household. Both of us always worked, and there were years when she made more money than I did. A couple of years ago, the unforeseen happened: she became very ill with diabetes and was unable to work. In fact, her doctor gave her authorization to get a handicapped parking sticker because nerve damage to her feet prevents her from walking too much or standing too long. My wife has applied for disability through Social Security, and is till fighting for it. She is only 40 years old.

Very quickly, we had to adjust to becoming a one-income household. It meant that we had to watch our spending and stretch my income as far as we possibly could. We had never planned on living on one income, and we quickly burned through our emergency fund, which I am once again in the process of rebuilding.

Is it possible for a family of four to live on one income? Sure it is. Is it easy? Not exactly. We learned some hard lessons making the transition from a two income household to having only one breadwinner in the family. Here are some lessons we picked up along the way.

1. Expect the unexpected. If you are married, don't expect that you and your spouse will both be able to work until you hit retirement age. Things happen: people get sick, they become disabled, they get injured on the job, etc. Don't automatically assume "this won't happen to me". Ask yourself "what if this happens to me?". What will you do then? Make a plan in case the worst does happen.

2. Don't skimp on insurance. This includes health, life and long-term disability. If you and your spouse both work and depend on both incomes to cover your household expenses, you should both have all three of these insurance policies. This is one area where you can't try to get by on the cheap. If one of you is suddenly unable to work due to illness, death or disability, you will need this insurance.

3. Two words: emergency fund. Not all illnesses and disabilities are permanent. Ideally, your emergency fund will have three to six months worth of expenses (not three to six months worth of income. There is a difference). Determine what that number is and start socking away some money. On personal finance blogs, the term "emergency fund" has almost become a cliche'. There is a reason for that. It's that important.

4. You can't live like you still have two incomes. Why? Because you don't have two incomes. Now you only have one. That means less money to spend on things you might have taken for granted. Downsizing to one income is not just a fiscal change, it's a lifestyle change.

5. Don't stop saving for retirement. No matter what your current situation is like, you will still need money for retirement someday. You might have less to save for retirement, but save something.

6. Remember, you will save money, too. With only one person going to work each day, you might be able to get rid of that second car. Also, only one person needs to pack lunch each day, pay for a business wardrobe or work uniforms and other work-related expenses. If you had been paying for daycare for the kids, you can get rid of that bill, too. Shift money you were spending on these expenses to other areas.

7. Use the Savvy Frugality spending plan for unexpected windfalls. If you come into some unexpected money, don't automatically think of this as "mad money". Pay debts first, then your emergency or savings fund, then household expenses. For example, if you have no long-term debt, then throw that money into savings. If your emergency fund if fully funded, then take care of those household expenses. Whenever I get unexpected windfalls, I always use 10 percent for "fun money". By doing that, I don't feel like I am depriving myself, and I prevent myself from blowing the other 90 percent.

8. Diversify your income. Never depend on one job or one income source for your living expenses. I am like Kramer from the TV show "Seinfeld". I am always looking for another way to make a buck, because my family could always use an extra buck. This could mean being a regular seller on eBay, working a part-time job, making and selling crafts, etc. I have a 9 to 5 job, but I also do freelance writing for web sites on the side. I volunteer for extra work at my job, especially if there is a bonus involved. This extra money will never replace my income from my regular job, but it sure makes life more comfortable.

9. Remember this important advice from The Tightwad Gazette: Buy it cheaper, make it last longer, use it less. This can apply to many things in your household, or to your car. The less often you have to replace something in your home, the less money you will spend.

10. Don't live on credit. Don't try to get by temporarily on credit cards or payday loans. You will only dig yourself into a deeper hole. These are no substitute to emergency funds or reducing your spending. You may have to downgrade to a less expensive car, a cheaper home and tap water instead of bottled water (which is a good idea anyway). Remember, these things don't define you as a person, and who cares what other people think? They aren't paying your bills. Also, some people CHOOSE to be a one-income family, either due to a new child, one spouse returning to school, etc. There is nothing wrong with that, but these moves do require some pre-planning.