Finances is not something I speak about frequently with my parents. We are in that limbo-type age group where we are raising families and our parents are quickly approaching retirement, if they are not there already. We didn't talk about money growing up. It was taboo....it was something that we were just going to assume was "there" when we needed it and we didn't need to worry our pretty-little-kid-heads about adult matters.
During the last election (shudder), a lot was being mentioned about how things "used to be".
Well, let's talk a BIT about how things 'used to be' and how we HAVE to approach finances differently than our parents and their parents did....even if they wax nostalgic about the "good ole days" and believe their way was ultimately best.
Because times, they are 'a changin' and all that....and if you're still holding out hope for a job with a pension and social security benefits that will keep you...well...anywhere near secure......you may be holding on to that hope for a really long time.
My Grandparents (may they rest in peace) survived the Great Depression. Grandma used to regale us children with stories about Christmases with little more than an orange in her stocking.
While raising 8 kids in a 2 bedroom home in Wisconsin during the 1950s, they were placed smack dab in the middle of what people fondly remember as the "good ole days". When times were good, violence and poverty were nil, people had jobs they kept for 40 years and retired with fat pensions and the pride of a life lived supporting their family.
People and their rose colored glasses.
Per financial website wisebread.com, the average American yearly household income from 1950 to 1959 ranged from $3210 to $5010.
Adjusted for inflation that's about $32,000 to $50,400. Very similar to where we fall now.
In the 1950s, three out of five American families bought homes. The average size of that home being roughly 1000 square feet. Yup. 1000.
We have more than doubled the average size of a new home these days. We need room. For all our stuff.
People typically waited until they were secure in a job to purchase a home, and they typically stayed in that home their whole lives.
However, their appetite for discretionary spending on items such as clothing, cars, and television sets was peaked in the 50s. The typical household had 1 car, which they very often fixed instead of replacing when things when awry.
In the 50s, Americans typically saved about 9% of their income. They had jobs that promised nice pensions and retirements, typically. Unions were strong, employment rates were high, and
poverty was something the middle class could escape and ignore by moving out of the city and building their nice little 1000 square foot cracker box house in the suburbs. Which they did in DROVES.
We dream wistfully about a return to the economic prosperity and good feelings of the 1950s, but the country is no longer set-up to support this....and hasn't been for some time.
Manufacturing jobs, which saw their boom in the 50s, are being replaced by automation and outsourcing. The unskilled, uneducated worker can no longer support a large family, buy a home, and work the same job for 40+ years expecting a big cushion when he retires. It just. doesn't. happen.
In the 1980s, the folks raised in the booming 50s became parents themselves. Our generation was born (WOOT!) and we were raised in a time of great consumer spending.
The 80s kicked off with a recession (I was a baby so I don't remember a thing!...However, I think I remember my parents telling me once that the interest rate on their home mortgage was 9-12%!!!!!)
Electronic and tech jobs started to grow, replacing Rust Belt manufacturing positions. The issue here is, most tech jobs required college degrees....which a lot of kids raised in the 1950s didn't deem necessary.
College tuitions absolutely soared and many kids were raised in paycheck to paycheck households. The mom and dad both going off to work became the norm and latchkey kids followed.
The 1980s were still, however, a hold-over time where parents without a lot of education or job-skills could still find work in various factory jobs and make a good living for their families.
In our area, the local GM plant was THEE PLACE to land a job after high school. You'd have it "made", adults would tell us.
Sadly, the GM plant closed some years ago....leaving legions of uneducated and limited-skill workers without a plan, a future, or a nest egg.
We didn't save like we should have in the 80s and 90s. We bought more. We bought bigger. We took on gigantic mortgages and had 2-3 cars per household. We took out credit. LOTS of credit. We didn't sock money away....we didn't invest like our parents did.
Sadly, once the 1980s kids reached college age, they were staring down the barrell of $20,000-$50,000 in loans for your average bachelors degree and their parents were likely beginning 2nd careers at the bottom rung.
So, what can we do now to live successfully and finanically fit in these times of economic uncertainty, extremely expensive college, and high cost of living in general?
First, forget what our parents modeled for us. Forget the "good ole days" our grandparents whistfully wish for. Those days are not only over...they are not coming back. No matter how much men in suits and ties (that are WAY. TOO. LONG., dude) tell us they are.
We need to live in the now and plan for the worst finanically, NOT what we hope will happen. That's not to be all doomsday and tell you to dig a cellar and start stockpiling gold bullion and cans of beans, but you need to think rationally and take into consideration today's economics.
I honestly believe that my generation, those born in the late 1970s/early 1980s, were probably the last kids to go off to college as a social growth opportunity as much as an educational one. You went to "find yourself"....to discover skills and passions. To have your eyes opened by some crazy professor who wore Birkenstocks and smelled like tobacco.
Our kids really don't have that luxury. Few of us can afford to spend upwards of $40,000 so our kids can go "find themselves". We need them to do that earlier....and develop marketable skills that will allow them to move out of basements and make a living for themselves and their future families.
We also need to teach kids about investing and compound interest WAY early. I didn't learn about these things until I was in my THIRTIES. I mean, do you realize if I had been investing through my 20s how much I would have now?
To think about it makes me a bit ill.
We need to institute high school classes that are REQUIRED that teach the basics of economics, savings, debt avoidance, and investing principles. Exciting stuff? Not really.....but the only way we are going to turn things around even a little is to foster a gang of educated young folks.
We need to instill in our children the absolute importance of skill-building. Marketable skill building. You can still foster their love for sports, the arts, or hobbies....but the writing on the wall is you HAVE to have a marketable, pay-able skill in order to make ends meet.
This does not necessarily mean that 4 year college is necessary for every person anymore. Technical schools have some fabulous programs and at a fraction of the cost of many 4 year institutions. Healthcare jobs are still in high demand. Tech jobs are in high demand. The market may have wildly changed since our parents could make it as line-workers at the GM plant, but that doesn't mean we can't adjust and thrive!
Things are wildly different than they were in the 1950s. In the 1980s. In the 1990s. This is OUR time. We have to do things differently than our parents did them. We have to prepare our kids for THEIR time. We have to realize that, as much as we may love them, our parents probably made a lot of financial mistakes.....as did their parents before them. As we become the "sandwich generation" (caring for young children AND aging parents)....some of the financial mistakes they made may come back to haunt us.
But we will be better prepared. We will be knowledgable about our options. We can start now and maybe urge our parents to start planning for their life beyond independent living (this can be a super-hard discussion and probably warrants it's own blog post).
It's our time. Proceed accordingly.