I believe in propriety. I wasn't always this way; I simply didn't realize its importance. It took the examples of good friends to help me realize how important it is. Let me explain.
At a park one day, I overheard a preschool teacher say, "friends of Cathy over here...." and on she went, assigning the kids to teachers, using their first names and the phrase friends of. It drove me crazy. At first, I reminded myself not to judge and thought to myself, what is it hurting? Then I thought to myself, It's erasing the line between children and adults, which I believe to be important. Why is it important? Respect. Children will obey people they respect, and it's important to obey (most) adults.
We require our children to address adults using the appropriate title, which we help them learn. Father, Doctor, Missus (Mrs. = Mistress ... who knew!?), Miss, or Mister. At first, I thought it was too much for a child to learn and repeat the mouthful that a last name becomes when added to Mrs., Miss, Mister, or Doctor. When I saw small children--who belonged to friends of mine--calling me "Mrs. Parker" without a problem, I knew my own children were capable. Now there are a few friends of ours for whom there are exceptions. For one reason or another, our children address three or four adults by their first names. I get the impression that these particular adults are more comfortable this way.
In our diocese, we address priests by their last names. Father Kennedy, Father Nixon, Monsignor Ford, not Father Bill or Father George.
What about aunts and uncles? We insert the title Aunt or Uncle before the person's first name. Aunt Laurie, Uncle Seth, Aunt Mandy, Uncle Eli, and so on. We encourage this but don't stick to it as tightly as we do with other adults. Grandparents are addressed by the title, Grandma, Grandpa, or Nana. Adult cousins? First names.
Who gets called what can be tricky, but it boils down to this: there are nuances that they're just going to have to learn to understand gradually, as they grow up.
My brother Seth didn't understand this at first. He joked about it, calling the girls Niece Morgan or Niece Madeleine. I explained to him that there is a natural order in families. Adults are in charge. The natural order follows out in public: adults are in charge. To help our children understand and remember this natural order (read: they are NOT the bosses, we are), we expect respect from them. God set it up this way; he knew children weren't ready to take the reins in their house ... although I'd say in some houses, they've got the reins and the horses are running wild.
When my children become adults, they are free to address people respectfully, as they see fit. For now, we stick to propriety.
How do you do it?