Economic policy matters. Inflation hurts. But something else is quietly eroding the American dream: how we are raising our children.
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Every headline right now screams about inflation. Tariffs are rising, prices are climbing, and experts warn we could be on the brink of stagflation: slow growth, high unemployment, and surging costs.
Here’s the reality: The U.S. has placed historically high taxes on goods imported from nearly 100 countries. We haven’t seen rates like this in almost a century. Higher import costs mean higher business costs, which means you pay more for groceries, clothing, electronics, and nearly everything else.
Economist Ernie Tedeschi from Yale’s Budget Lab says tariffs have already cost the average U.S. household thousands in lost purchasing power. That equals months of car insurance, electric bills, and groceries… gone. The media would have working middle-class parents believe that’s the killer of the American dream, when the real threat is streaming K-Pop Demon Hunters in our own living rooms.
Economic policy matters. Inflation hurts. But something else is quietly eroding the American dream: how we are raising our children.
Today’s kids have never been more financially powerful and never less prepared to use that power responsibly. I have been selfishly studying this generation for over a decade, and the trend is clear. Back in 2016, I wrote that “never before has there been such a passionate, intense and borderline obsessive relationship between two generations as the one between millennials and Generation Alpha.” That relationship hasn’t cooled. It has only grown more expensive for working parents.
A Billion-Dollar Paradox
We’ve created a strange paradox: the most financially influential generation in history, but not the most financially literate or emotionally resilient. We preach the value of financial literacy while giving kids unprecedented access to money with minimal earning requirements. It’s like handing them the car keys before they’ve passed the driving test.
According to DKC Analytics’ A Guide to Gen Alpha: Insights on the Gateway Generation, the average Gen Alpha child controls $67 a week in spending money, which equates to $3,484 annually. Collectively, children ages 8 to 14 directly influence $101 billion in consumer spending each year. Parents estimate Gen Alpha shapes 42% of household purchases, with fathers putting the figure at 50%.
And this isn’t just “pocket change.” Ninety-one percent of Gen Alpha kids earn money in at least one way, most of it funded by parents: chores (72%), payment for grades or behavior (66%). Even with inflation prompting parents to cut allowances, 83% of kids still receive one, averaging $20 per week. Nine percent receive $100 or more.
Their influence on household purchases is staggering, and it’s not just everyday spending either. Sixty-three percent of parents say their kids love luxury brands. Thirty-four percent of parents buy during product “drops” because of their kids, and 35% have purchased a luxury brand as a direct result. Gen Alpha is also pushing families into new consumer behaviors: 61% shop online more, 46% use virtual try-on technology, 44% make microtransactions, and 40% attend experiential shopping events.
When you combine rising tariffs, shrinking purchasing power, and a generation trained to spend without restraint, you get a financial squeeze that no interest rate cut can fix. Inflation is a problem. Tariffs are a problem. But the spending habits we’re nurturing at home may be the most expensive problem of all.
How We Got Here
This influence didn’t happen by accident. Brands have been grooming Gen Alpha for years, not just to buy, but to act as household decision-makers. Their sway is reinforced daily by peers and perfectly curated online feeds. Years ago, I reported that 37% of parents said their kids asked for something because a friend had it, while 22% said online influencers swayed them.
On social media, you may have seen the term FAFO parenting, short for “f* around and find out.” It’s a modern label for an older approach: authoritative parenting that lets kids make choices, face the natural consequences, and learn from them without a parent rushing in to soften the blow. That process (making mistakes and recovering from them) is how resilience is built. Remove the consequences, and you remove the chance to develop grit.
But when it comes to money, FAFO parenting is almost extinct. Many parents cancel the consequences before kids ever feel them. For example, if a child’s card balance isn’t enough to cover a purchase, Greenlight can be set to automatically pull the difference from the parent’s linked debit card or bank account so the transaction goes through. Parents can turn this feature off to let a decline become a teachable moment. But when it’s on, it acts like a backup wallet, sparing the child the embarrassment of a declined purchase, but also sparing them the lesson.
Some of these patterns have been brewing for years. Nearly ten years ago, I observed that millennial parents often place parenting above career or financial success. The result is sometimes overpraising, overprotection, and overindulging children, mixing emotional intensity with economic privilege in ways that breed entitlement.
Financial independence is supposed to lead to emotional independence. In healthy families, that’s a rite of passage. But the data suggests too many working parents are trading that rite for convenience, raising kids fluent in spending power but ill-equipped for the financial realities of adulthood. And in the long run, that will cost more than any inflation spike.
Bottom Line
When I read some of the latest financial stats to my daughter, alongside the reality of rising tariffs and inflation, my 14-year-old, Maya, didn’t miss a beat:
“Well, we’re not out selling drugs, so the money must be coming from you.”
She’s right. And when I point a finger at other parents, I point three back at myself. I’m parenting poorly. Inflation can shrink paychecks, but poor parenting shrinks potential. If we keep wrapping kids in bubble wrap while giving them billion-dollar influence, we will raise a generation fluent in spending but bankrupt in resilience, problem-solving, and grit.
The American dream has always been about building something better than what you started with. That’s not just an economic goal, it’s a parenting goal. Right now, too many of us working parents are failing at it. We’ve confused parental comfort with child development. It’s easier to keep a child safe than to watch them fail. It’s easier to buy what they want than to explain why they can’t have it. Here’s what working parents can do to course-correct financially.
- Cap the allowance. Give a set amount and don’t refill when it’s gone. Overspending should sting.
- Show the math. Explain how tariffs, taxes, and inflation raise prices, then comparison shop together.
- Link work to pay. Offer extra income only for real-world jobs, not routine chores.
- Cut the safety net. Turn off auto-top-ups like Greenlight’s parental pull so declined purchases teach limits.
- Live it out loud. Share the spending trade-offs you make to stay on budget.
But easy parenting creates hard adulthood. Overprotected kids become anxious, risk-averse adults, or overconfident spenders with no sense of consequences. Both chip away at the American dream faster than inflation ever could. If inflation is the storm battering household budgets, our parenting choices determine whether our kids grow up learning to steer the ship, or simply spending faster until it sinks.
Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.