tough issue.

Girls with kids usually the logic a bit out.

To them if u frugal they felt like they are failing their children. In their mind u are purposely giving them short stick to prepare for own retirement. Most humans tend to focus on stuffs that immediately impact them, rather than the long term. Now with kids, it's even harder for them to see further into the future. All they can feel is the children receiving less.

My suggestion.
- send kids away for 2 days. sit down with your wife and list out all your expenses. see how much is left after deducting the necessity. Then compare it to the recent vacation, see how many months of disposable income are required for that vacation alone.
- before doing all the heavy work. bring your wife to the nice restaurant. watch a movie. buy flower keep her happy. compliment her thank her for looking out for enemy. human reacts better with compliment. surprisingly huh?
- really, do heavy discussion without kids around. most important step here. send the kids away. highly not recommend to do it after kids asleep, because by that time both of u already dead tired and unhappy. bad timing to discuss bad news.