My son went to college armed with a joint bank account, shared with me. This allowed me to deposit funds easily by transferring from my account to the joint account… it also allowed me to see what he was buying. Given that most kids don’t carry cash, I was able to track his spending in minute detail.
It didn’t take long for him to figure it out.
By the third month he told me he was getting a job and then depositing his earnings into a separate bank account, at a different bank.
He called a few days later, somewhat surprised that when he opened his new account at the credit union on campus they were actually going to charge him money to hold his account.
Welcome to the world of service fees, my son.
But this was just the first of many revelations he had during his first year on his own…
He began to notice that the consumer world is full of businesses that want to separate you from your money.
As he’s made his way, he has become something of a miser, viewing every transaction suspiciously. I thought he was just an unusual 20-something, but it turns out he’s normal… at least for his age.
A NerdWallet.com study of more than 1,000 shoppers over 18-year’s old showed interesting results. The company asked about general buying habits and plans for this holiday season in particular.
It found that people under 30 are the least likely to go into debt to buy holiday gifts. As one respondent noted, if the recipients really care about you, they wouldn’t want you going into debt just to buy them stuff.
That’s a far cry from the way those in the 60+ category responded. This group is more likely than the youngsters to go into debt. They’re also the most likely to shop by convenience, foregoing sales, discounts, and bargains.
So the aging Boomers are somewhat insensitive to price, while the kids are counting nickels.
Depressingly, it makes sense. The Boomers have the cash, while the kids are still looking for jobs.
As I wrote to you a while back, median income has been stuck in neutral for years. In fact, adjusted for inflation, median income has been dropping for half a decade. But if we sort the data by age, a different picture emerges.
While the 15 to 24-year-old group has lost 11.6% of its income since the early 1970s and 17.6% of its income since its peak, the 55 to 65-year-old group has gained 16.7% since the 1970s and only lost 7.7% of its income since the top. The older group also has lower unemployment.
Looked at in this way, it makes perfect sense that their views of spending are so different. People with steady jobs and good income aren’t so worried about the future.
The problem with this is obvious.
If the young people in our economy are rightfully concerned about their financial situation and what lies ahead, what will compel them to make the life choices – like marriage and kids – that tend to drive our economy?
P.S. Harry teamed up with John Mauldin recently to discuss their views of the coming year, and what they suggest are good and bad investments. They recorded this meeting so you can watch it as well. Simply click here.
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Ahead of the Curve
The consumer economy beckons generalizations, yet individual consumers make widely varying buying choices. That’s why, as Rodney shows above, you can simply compare the spending of a 20-something to that of a Baby Boomer and expect a congruent, apples-to-apples conclusion.