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Comparing Spending Habits of Different Generations

July 14, 2010 · 27 comments

in Personal Finance

I often think about the spending habits of different generations.  I have only been alive for 42 years, but from what I have heard and read, previous generations did not seem to be as free-wheeling as people are today with their money.  Well, maybe not going back one generation, but a few generations…

Let me explain.  I spent a lot of time with my grandma, who was born in 1904, and her generation was the epitome of frugal.  They had survived the Depression, wars, and things that people my age cannot fathom nor appreciate.  After she passed, I sorted through some of her items, and she had a little black book detailing each of her expenses.  The items she specified were almost exclusively fixed expenses, there was not much discretionary spending in there at all.

Flash forward many years later to my generation, and it is a much different story.  For many, it seems that ‘extra’ spending takes priority. People pay the minimum on their credit card and then end up buying an Ipad or whatever strikes their fancy.  There seems to be a ‘live for today’ mindset, instead of ‘prepare for the future’.

So what is the reason for such a difference in attitude? I think part of it is how easy it is to spend money. I remember for me personally, I received many credit card offers while I was  in college, and especially after graduation.  Providing a college student with credit can be a recipe for disaster.  It isn’t bad enough to offer credit, but also allowing kids to then withdraw cash from their credit card like they would a debit card can also be destructive.  I did have to resort to that a couple times while I was in college, and I really paid for it in interest charges.  In addition, I remember back to when I was pre-approved for a mortgage.  The amount that we were approved for was way more than we were comfortable spending.  However, I know many people bought houses right up to the upper limit they were allowed.  I would hate to think of where we would be now had we bought a much more expensive house.  We would definitely be underwater given how much house prices have plummeted.  What a depressing thought.

In addition, I think the media may be somewhat to blame.  All these television programs that show the glamorous life of teens and young adults that seem to have it all.  What they don’t show is that reality is nothing like that.  But many people strive for some ‘ideal’ that really does not exist.

Finally, part of the reason I live in a generation of spenders may be that there are so many interesting things to buy these days.  When I was in college, I wanted a Sony Walkman.  I think it cost about 30 dollars.  Now, the items that kids want are way more expensive.  Xboxs, Ipads, Ipods, flat screen tvs, you name it.  These are not small ticket items!  So many kids have television sets and computers in their rooms, and all those items are very expensive.  When my grandma was raising my dad, fancy electronics did not exist.  There was no line item in her ledger marked ‘new laptop for sonny’.   However, I have a feeling that even if laptops did exist back then, my grandma would not be buying one for my dad.

Unfortunately, I know that I too have probably overspent on things I should not have.  I cannot even imagine comparing my ledger (if I had one) against my grandma’s!  At least we do pay off our credit cards every month and our last remaining debt is our mortgage.  But I do know that we could improve too.

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{ 23 comments… read them below or add one }

Sandy L July 14, 2010 at 7:46 am

I really don’t think people are any dumber now then they were 50 years ago. I just think there wasn’t as much access to credit. I’m sure many of that generation would’ve gotten in trouble too if they had the means to do so.

I also think we have more disposable income due to the femminist movement. Women not only can work, but have careers that pay as much or more than a man’s. I know in my case, I contribute almost 40% of our household income and for about 5 years it was more like 60%.

I think having women in the workforce automatically increases variable expenses. If you’re at work 40 or more hours a week, something has to give. It’s either dinners, housecleaning or the like. It’s hard to do everything and work full time. We still try to do it all, but let’s not beat ourselves up over not making everything from scratch and darning every sock. Grandma had more time than money. And we have more money than time.

I love the easy access to credit when it comes to housing. I have mixed feelings about the credit card. I love the convenience of it, but it’s gotten so many people in trouble I wonder if we’d be better off without them.

America has turned from a manufacturing based economy to a service based economy and although lots of innovation still happens here. I think I’d prefer my money going to corporations that make stuff vs banks. So here’s my theory. If everyone waited until they had cash to buy their i-phone, that means they wouldn’t be paying 30% more to the bank for that item. If everyone had 30% more cash, then they’d have more money to buy stuff or invest in companies who make stuff. And stuff is what makes the economy whirl. If people got and stayed out of debt, they’d have more cash to pump back into the economy and keep people employed. Just a crazy theory. What do you think?

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Kris July 14, 2010 at 10:37 am

Sandy, I don’t know, I think I have more time than money now, and my grandma may have had more money than time. Cooking, laundry, many things took longer to do back then than they do today. Plus many women didn’t have cars then either, so that meant walking or taking buses to the store. There wasn’t a taco bell at every corner- it was a given that every dinner (almost) would be from scratch. That meant really cleaning a chicken sometimes too. I think to a large degree, ‘keeping house’ really was a full-time job. It was just a different time, and I really believe that it was a totally different spending mindset.

I do totally agree that it would be so much better if that 30 percent went back into real items versus interest to the banks. However, we seem to be such an instant gratification society that I don’t know how you make that happen. I do wonder if this economic crisis will force credit card companies to re-think providing such easy credit to everyone. They probably have to be burned enough for it to happen though.

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Benjamin Bankruptcy July 14, 2010 at 9:43 pm

Go to google scholar and search for “credit assessment” you’ll find a whole bunch of articles from 1910, I remember my grandfather (born 1925) telling me that him and Nana promised each other that they wouldn’t buy anything on credit. He laughed telling me they bought all these appliances but had to wait until they had enought money to have the gas conected.

Our grandparents had access to credit, they’re the generation that invented the credit card.

I think alot of the financial problems gen Y has is due to Baby Boomer spending behaviours and attitueds towards money. Baby boomers typically have spent more than they’re parents have and have typically thought of frugality as out dated and leaving some money behind for the kids, that’s just crazy.

I think they desided they were going to have FUN and not deprive themselves of anything

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Kris July 14, 2010 at 10:24 pm

Benjamin – I agree 100 percent!

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Jackie July 14, 2010 at 8:37 am

I think people back then had access to credit too, but in general it wasn’t as accepted. I suspect borrowing money was viewed as something shameful, as opposed to something that everybody does without a second thought. Maybe that had something to do with it too.

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Kris July 14, 2010 at 10:38 am

Jackie, I agree- borrowing did seem shameful or something back then. I don’t think previous generations ever wanted to ask for money. It was a sense of pride to have your own home and your own car. (I bet cars were cleaner back then too!)

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Split Cents July 14, 2010 at 8:40 am

I was actually thinking something similar lately! Sure, there is more credit available, but there are also lots of cool gadgets that I want to put on my credit card: Blu-ray discs, ipods, hot yoga classes, etc. My grandma was also always extremely frugal, having lived through the depression and WWII–she would always tell stories about salt rationing and the like.

But something tells me that when you only get four channels, a TV wouldn’t seem like much to have.Today, internet access is almost a necessity: to apply for jobs, keep up with the news, etc. Heck, two-thirds of Americans currently have internet access and nearly that many have broadband access… My grandma never had to worry about paying her Comcast high-speed internet bill!

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Kris July 14, 2010 at 10:40 am

Split Cents – Yes, grandma didn’t have an I-phone to look up her recipes, that is for sure. Nor did she have the bills that go along with all the electronics. Access to expensive items is way too easy, and alluring for many. Why wait when you can have it today? It is one thing if it is something you really need, but to go into debt for a new home theater system makes no sense to me.

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Joe B January 31, 2011 at 1:59 pm

The difference in generations is interesting to say the least. However, as you stated, grandma didn’t have to pay an Internet bill or cell phone bill. Now though, these items are almost to a point of no longer being wants, but needs.

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Budgeting in the Fun Stuff July 14, 2010 at 10:37 am

I don’t see a generational gap, just an educational one. I have had a credit card since I turned 18 and never once went crazy or even carried a balance. My parents and grandparents raised me to understand the ins and outs of credit…the benefits of cash back but the responsibility to live within my means and pay off the balance every month.

Both my grandparents lived through the depression as kids, so they are frugal but they don’t hoard their money like rabid squirrels. They live within a budget and make sure to include fun stuff like cable, internet, DVR, and Netflix in that budget. My husband’s grandfather includes tithing, golf, and water aerobics. I like that balance – smart planning and enetertainment at the same time. 🙂

As far as credit cards go, all our grandparents have them and pay them off every month…my grandpa would be proud to tell you what he did with his cash back anytime you ask. 🙂

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Kris July 14, 2010 at 10:44 am

BFS, I obviously did not live back in the early 1900s like my grandparents did, so I can only go by how life was described to me then, and by what I see from some of the records she left behind. I really believe our generation is much more likely to spend than they were. It may be because there are more ‘neat things’ to buy. Maybe if internet and fancy electronics and easy credit were as available back then, they would have been in as bad an economic situation as we are in today. However, a lot of people lost their homes and such because of the collapse of banking and the Depression, not because they bought giant homes that were overpriced and then took out home equity loans against an unreal value of the home.

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Little House July 14, 2010 at 12:25 pm

Things are more accessible today than they were 60 – 100 years ago. In the early 1900’s through the 1930’s, mobility was a challenge. Even after the invention of the car, not everyone was able to purchase a vehicle, limiting where you could go and this alone could reduce one’s spending. Before the 1930’s, mortgages were rare and practically unheard of. Most people had to purchase property out-right or inherit property. Mortgages became popular around the depression. This started the credit-ball rolling.

Today, the media also plays a large part, advertisers can pitch their goods anytime, anywhere. Much of the buying habits of consumers are driven by advertising. Your grandma only saw ads in newspapers, magazines, or occasionally heard them on the radio. She wasn’t inundated with ads all day long. This also plays a part in increasing consumer spending. But, this is just my quick and dirty history lesson! 😉

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Kris July 14, 2010 at 9:39 pm

Little House – I totally agree with your history lesson. It is very easy to be tempted to buy things, given there is paid programming on all the time, along with nice pictures in magazines, billboards, and more. I think when my grandma was my age, there wasn’t much more than the Sears catalog!

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Money Reasons July 14, 2010 at 5:42 pm

Wow, I’m in total agreement with you (but then again, I think I’m always in agreement with you)!

My grandmother was born in 1925, and she had plenty of stories about the depression that formed the basis of my frugal ways… My grandmother has passed too, a very sad day for me, she was a great lady!

Credit cards and the media, are definitely the causes! 🙂

Nice job!!!

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Kris July 14, 2010 at 9:38 pm

Money Reasons – aren’t we smart? 🙂

Thanks for for the very nice comment!

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Financial bondage July 14, 2010 at 7:24 pm

Hey, your only a few years behind me age wise. 🙂

My grand-mom was born in 1908. People from this generation have a valuable viewpoint on money and debt for sure. We can learn a lot from them. They did not borrow money for the most part. Very few exceptions. My grandmother got a small modest house and car many years later when she married. That was about it. No credit cards. And they paid back what the borrowed. No taking the easy way out with bankruptcy.

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Kris July 14, 2010 at 9:37 pm

FB – I think the thought of debt just angered my grandma, not debt for her. She had a credit card, but kept the limit at 300 dollars, which I found hilarious!

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Rebecca The Greeniac July 14, 2010 at 11:02 pm

Wow… well I could probably write a book on this subject… not necessarily a well informed book, but I’ve certainly got plenty of opinions on the matter.

I’ll spare you my long diatribe, but in general I think what we’re seeing is the giant marketing machine at work. While this country has systematically stopped manufacturing “things” we’ve certainly done a good job of manufacturing “need”. Take the whole concept of “planned obsolescence” for instance. It used to be that when you bought something you could have a reasonable expectation that it would last. These days, most things can be replaced cheaper than they can be repaired so nobody even bothers. If you haven’t already, you should definitely check out The Story of Stuff… it’s rather horrifying: http://www.storyofstuff.com.

And while credit was certainly available in my grandparent’s era, it was not “the norm” as it is today. I’m old enough to remember a time when no grocery store would accept a credit card! I had a friend who worked for a bank in the 1980’s and she can tell horror stories about the things they did to get people to spend money that they didn’t have. I think my favorite story was about the time a fellow called up saying there was a problem with the credit card that the bank had issued for “Queenie”. “Oh… what’s the problem?” my friend inquired. “Well,” the man replied, “Queenie is a toy poodle.” I just think that story is emblematic of the steps that the banks took to get us all into debt up to our eyeballs.

OK… I’ll stop ranting now… but I have to say this. It’s not an accident. When you have an economy that is completely dependent on consumer spending, and the people in power are more concerned about looking out for the interests of banks and businesses than they are in securing the welfare of the citizenry, massive debt is the inevitable outcome.

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Kris July 15, 2010 at 1:16 pm

Greeniac – You are so right, a lot of our economy is definitely dependent on consumer spending. I wish we could get back to manufacturing more.

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mac-how July 15, 2010 at 7:30 am

I think spending habits depend on earning abilities). Also very important is what your childhood was. These are general, not depending on time concepts.

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Kris July 15, 2010 at 1:15 pm

Mac – Some people continue spending as they learned, and others rebel. I have seen both.

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Debt Helper September 3, 2010 at 6:21 pm

I’m currently tracking all of my families spending for the month to see where all of my money is being spent.

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Mariko Vandever December 2, 2010 at 2:19 pm

My friend told me about this

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