Steve Robinson and his wife Krista are trying to tell me where their money goes. Actually, they’re trying to figure out why they rarely have any money left at the end of the month to stash into a savings account or, say, an RESP for their two young daughters. After hearing their story, I’m stumped too.

Steve, 40, and Krista, 36, live in the Edmonton suburb of St. Albert. Steve used to be a truck driver. But after his eldest daughter was born, and he was stuck on another long-haul drive to northern British Columbia, he quit, went back to school and became a welder so he could spend more time with his family. Krista shares his kids-first philosophy. She operates two private schools in town.

Like most middle-class couples with young children, the Robinsons (whose names we’ve changed) spend their days in a blur of activity. They rise early, grab breakfast with their two daughters, Julia, 8, and Sarah, 7, then rush out the door to drop the kids off at school and get to work. A few hours later, they scurry home, make dinner, and take their daughters to skating, violin and karate classes.

Together Steve and Krista earn slightly more than the average Canadian family, and they try to be smart with their money. They pay off their credit cards every month and they own just a single vehicle — a 2001 GMC pickup truck that Krista drives to her work. Four years ago they bought a house for $230,000 and took out a 20-year mortgage. They’ve accelerated their payments and they are hoping to have their home paid off in 14 years.

If Steve keeps his welding job and students keep enrolling at Krista’s schools, things should work out just fine. But Steve and Krista don’t feel as if they have it made. Far from it. Whenever they look at their bills at the end of every month, they realize that they are skating on the brink of catastrophe. They have no savings to fall back on if something should go wrong, no RRSPs or RESPs to cash in down the road. A while back, Krista tried to set aside 10% of their earnings, but that didn’t work out. She had to put the money back into their general account to pay bills. She worries constantly about her family’s lack of a financial buffer.

So what are Steve and Krista doing wrong? If you listen to many commentators, their problem is a simple lack of self-discipline, a selfish desire to have everything at once. A recent headline in the Vancouver Sun blares: “Overspending rampant among young.” The Montreal Gazette concurs; according to its headline writers, we are “a nation of overspenders.” A study, commissioned by Mackenzie Investments, deplores the tendency of Canadians under 50 to spend without thinking about their financial future. And economists moan about the declining saving rate. While Canadians put away nearly 20 cents out of every dollar they earned back in the 1980s, today we save less than three cents out of every dollar we make.

The conventional wisdom adds up to a stinging indictment of today’s spendthrift middle class. It sounds convincing — until you talk to folks like Steve and Krista. They and their two daughters shop at a local discount supermarket and get by on less than $500 a month in groceries. They rarely eat out. While Krista says they would like to take the kids to Disney World, all their vacations so far have been visits to family in B.C. “There’s nothing fancy in our household,” Krista says. The family’s only indulgence is a single television — a 42-inch floor model they bought for half price. But Steve refuses to spring for cable access, because he would rather his daughters read books than watch TV.

The simple fact is that Steve and Krista are doing nothing wrong. They make a bit more than average, spend wisely, and just barely make ends meet. Millions of middle-class families across the country are in the same boat. Their paycheques show they’re making decent money. But their bank accounts are empty.

How is that possible? For more than a quarter century, middle-class incomes have flat-lined in terms of real purchasing power. Meanwhile, a host of unavoidable costs — for necessities such as taxes, child care and mortgages — have surged. Even with both parents working full-time, the middle class is drowning in a sea of rising costs. The result is a paralyzing sense of economic vulnerability. With a recession looming ahead of us, the middle class is facing potential disaster. Yet no one appears to be paying attention.

The natural place to begin understanding the middle-class squeeze is by looking at how much each of us earns. We all know that we make far more in dollar terms than our parents did 25 years ago. But what most people don’t realize is that nearly all of the apparent increase is inflation. If you strip away the impact of rising prices, the years between 1980 and 2005 turn out to be a dead zone for middle-class prosperity. During this period, in terms of inflation-adjusted dollars, the median annual salary for a full-time worker rose all of $53 — that’s right, $53 a year — to $41,401, according to Statistics Canada. A quarter century of progress has resulted in the average Canadian earning a raise equivalent to the cost of a family night out once a year at Swiss Chalet.