“In my day if we earned a quarter, we spent 15 cents and saved a dime. Your generation earns a quarter, spends the quarter and then borrows another quarter at 25% interest!”
I really identified with that saying by Jeanette Pavini in Market Watch. Wondering why it spoke to me so profoundly, I drilled deeper and came to the following conclusions:
- The thought processes are totally different between generations. When I was a kid, the concept still existed, that you can spend only what you have and no more. I would receive an allowance each week, but only after I showed the balance, and how the difference with last week was spent. It was not a matter of “checking up on me” as to how I spent my money and whether is was done wisely. My dad never evaluated the wisdom of my decisions, only the record keeping: that my physical amount of money matched my records. To give an example: A 10-year-old’s version of “living within one’s means” might include financial decisions like choosing whether to buy a new video game or saving their money so they can eat at the concession stand with their friends at the next field trip.
- Today’s generation is taught that you can have it all now. To sweeten the deal, the idea is that you pay-for-it-as-you-go, enjoying both your new video-game and a good time with your friends. This concept is permeated throughout our society: with lower interest rates you refinance your house, as your family grows you purchase your next bigger house, when you get a loan the payment plan conveniently shows the “minimum payment” (because the longer you draw out the payment the more interest your friendly banker makes!). Immediate gratification comes with a price, but “oh well, the house price will go up anyway, right?”
“Our financial habits rub off on our children and influence their relationship with money later in life. But what may be surprising is just how young children start to form financial habits. Adult money habits are set by the age of seven, according to a study by behavior experts at Cambridge University and published by Money Saving Advice.
Many children are growing up in debt-ridden households. As of September 2014, the average household owed $7,281 on their credit cards, according to NerdWallet.com’s analysis of Federal Reserve statistics. Looking at just indebted households, that number rises to $15,607 in average credit card debt per household. That’s a collective $880.5 billion in credit card debt that American consumers owe.” (from an article by: Jeanette Pavini’s Buyer Beware, in Market Watch).
I got my first credit card at 18, a BankAmericaCard, the precursor of Visa. I started using it for everything…and still do a half-century later! But I NEVER carry a balance, instead using credit cards for the float they offer, for tracking my expenses, for frequent flyer miles, for enabling car rentals and hotel stays, etc.
Credit cards aren’t the enemy. DEBT is the enemy and credit cards that are paid in full each month don’t generate debt.
PRINCIPLE I about NATIONAL DEBT:
Teach your children the difference between (National) Debt and cultural habits.