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Is There a Generation Gap in Saving?

I’m old-school: I went to the bank to make a deposit today. (I make most of my deposits in person, inside the branch.) While I waited, I chatted with the teller, whom I know from many previous visits. “I’m writing a book about money,” I told him. “What’s the one thing you wish you could tell people about banking?”

Save!” he said. He told me there’s a huge generation gap between savers and spenders. “The people who save are generally older. They don’t look like they have money, but they do. They’ve got a ton in their savings account and they chase the best CD rates. But the reason they have money is because they didn’t spend it when they were younger. They’ve been able to let it grow.”

“And that’s not what kids today are doing?” I asked.

“No way,” he said. “The young people I see spend all their money. They’re trying to impress their friends. They buy all this new stuff. Their bank balances are always low. They’re not going to have money saved like the older generation does.”

Then he gave me another great example. “There are people who come in here and you can see why they have money. You look at their account history, and the only thing that comes out is the big stuff, like their mortgage or their utilities. There aren’t a lot of $5 or $6 transactions.”

I laughed and said, “I’ll bet most people have tons of little stuff.”

“Oh yeah,” he said. “It’s all little stuff. But it’s that little stuff that kills you. That’s what will make it so you don’t have anything saved when you’re older.”

Before I left, I asked him if he had any tips or tricks I should put in my chapter on banking. We talked about a couple of ideas, and then he came up with something moderately clever (though it applies to just a few people): “If you’re going to overdraw your account,” he said. “Do it all at once.”

“What do you mean?” I asked.

“Well, let me give you an example. The other day, a lady called me to complain about overdraft fees. She’d been hit with a bunch of them at the same time. But when I looked at her transactions, I couldn’t believe it. She’d gone to the same grocery store four times on the same day, so she was hit with four overdraft fees. If she’d just gone once, she’d still have overdrawn her account — but only once.”

The teller also mentioned that nobody seems to know their bank balance anymore. “They don’t use a check register,” he said, “so they have to call to ask how much they have. But the problem is that what we show you have and what you actually have can be two very different things. It can take up to a week for some transactions to show up. You should track your spending, and not just trust what the ATM says.”

I thanked the teller — who looks like he’s 25, by the way — and left.

I wonder if it’s true that there’s a generation gap in saving. Has the older generation always saved? Or did they start out trying to impress their friends, too? I feel like I’m at a middle point, moving from the “spend to impress” mode of operating to a “who cares what other people think?” way of life. The latter is more liberating and it helps my bank balance.

I’m going to try to find time to interview my neighbor for my book’s banking chapter. I think she’s a manager at a nearby bank. I’d be curious to see what advice she has for people. But really, it doesn’t seem like there are a lot of fancy things you can do with a bank account. As long as you’re saving, you’ve shopped around for a good account, and you’re not afraid to ask to have fees waived, I think you’re golden!

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  1. My parents didn’t save money until they started getting older. You didn’t start saving money until you started getting older (no offense).

    This isn’t “people born before 1970 save”, it’s “people over 35 save”.

    Young people usually don’t have much to save, anyway. They have lower-paying jobs, less-established careers, cars that aren’t paid off (it takes five years for most people to pay off a car).

    It’s easier to save once you’ve established yourself.

  2. Ditto Tyler, but I would also add that there’s just a lot more temptations now. Even if you go back 20 years, there wasn’t a coffee shop on every corner, specialty stores with fascinating items, and there certainly wasn’t anything like the internet making the rarest of items accessible to anyone with a computer!

  3. Overall, I love your blog, but this post left me cold. I understand the dialogue device you’re using, but I think it’s very important for this type of post to have a feeling of authenticity. This post just feels forced and faked (as these “Some guy on the street said this” posts often do), and it really bothers me for some reason. Was it really necessary to put these words in a banker’s mouth to make your points?

  4. @Jonathan I used to work at a major bank on the west coast and this point is exactly true. I was a phone banker and people used to call in all the time to see what their darn balances were and then ask why they had a negative balance and when I explained that it was because they had overdrawn their account they screamed and yelled at me that they couldn’t feed their children because of me, not because they had gone shopping last week and spent all their money. I am 27 and my husband and I are huge savers, but I think that is also because we seem to be about 10 years older mentally and don’t have the same mentality about life as our peers. Whether this interaction was true or not, it is very realistic. Another banking secret is that they post the larger items before the smaller and so the customer has the probability of accumulating more overdraft fees than if the purchases were reversed.

  5. Sure there may be a difference in mentality but there is also a difference with the times and technology. Things like cell phones, digital cameras, HDTV, computers may not seem like things you have to have, but living in 2009 so the younger generation that are. And they are expensive, very expensive. Expenses are higher in general, taxes are up, and salaries are staying the same and actually for the younger generation a lot of people are getting paid less money just because a job is a job and this is in more expensive cities. In a lot of ways it is harder for a younger person to save, I am in my mid 20’s, I know. And I am probably more on the rare side who looks first to save. Granted I have some very expensive material items and have been on vacations, but I saved for months to pay in full. Sure the money would be better off in a savings account, but our generation wants to work to live, not live to work. Finding that balance is tougher for us now than in the past, but we work on it.

  6. For the chapter on banking, I’d be interested in advice on how to manage more than one bank/more than one account. I started with savings/checking at one bank, then added another (to split discretionary spending from regular bills) then added a credit union high-interest account, an account for my teenage son, an online savings for emergency fund, etc. One day I discover I have 9 bank accounts (not to mention loans, retirement and college savings). That’s a bit too much!

    Do you use more than one account to manage spending? How many is too many? Managing your accounts at different institutions might be a broader topic than just how to select a checking account.

  7. I think it is, in part, a generational thing. When I got my first promotion in my first job, I started a saving alotment of $50 dollars every two-weeks. I was making $2.50 a hour. I don’t know any 19 year olds now who save $50 a pay check although they are making far more than I did almost 40 years ago.

    I was rasied by children of the depression and those lessons stuck with me.

  8. Actually… I liked the storytelling man on street device used, or whatever you call it. It sounds totally authentic to me. Real event, real person, real advice. In a blog post it seems right at home.

    As to spending, it’s amazing how much those ‘little purchases’ add up. Cut that card swipe at starbucks every morning, the swipe at the fast food for lunch or dinner, and go for a walk instead of the movie theater. It’s amazing how much more money is left at the end of the month. Why it’s enough to pay for health care!! (If we even need it after all that walking and healthy eating)

  9. I guess I’m a lot like that teller. I’m 25, my husband and I have over $20,000 in savings, we pay more than the minimum on his student loans each month, and we made a game out of not spending money frivolously when we moved in together 2 years ago.
    Most people our age our not like that – including most of our friends. Sure there are more ‘temptations’, but really, they just think they HAVE to have them. Part of it can be blamed on parents and the way the learned about money growing up, but it’s also just that most people our age apparently need to be shaken hard to realize they really should be looking to save money.

  10. If you aren’t going to track your spending you need to have a big enough buffer so that you will never overdraw your account!

    When I was younger I carried a check register and I entered both checks AND Credit card charges. That insured that I had money to pay the CC, and gave me a much more accurate true balance for my checking account.

    -Rick Francis

  11. @Jonathan (#3)

    This conversation isn’t a device. I’m not putting words into anyone’s mouth. This is the conversation we had. Okay, it’s not all verbatim (I jotted notes while we were talking, but had to reconstruct some from memory), but this is absolutely the meat of what we talked about just three hours ago.

    Other highlights in my notes:

    * “Money tucked at home doesn’t earn interest.” (The banker’s talking about people who stuff cash under the proverbial mattress.)

    * He says that young people should see out older mentors: “Find someone who worked a normal job in their 20s and is doing well now. Talk to them.”

    Actually, that’s it. Everything else made it into the post.

    In other words, I didn’t start with an idea and then build a story around it; this happened to me, so I wrote a post about it. If it doesn’t feel authentic, that’s because I’m a bad writer, not because the banker didn’t say these things.

  12. I think a commercial bankers opinion might be a bit skewed because he doesn’t have full information. I am definitely a saver, but wouldn’t look like one to a commercial banker because I keep very little cash in my bank account (due to low interest rates). Most of my savings (and paycheck) goes directly into an online savings account or into index funds.

    I can see younger people being more comfortable with online banks/online investing, whereas older folks might use the traditional checking/savings account model.

  13. I used to spend and spend when I was in my 20s and 30s.

    I save and save now that I am in my 40s.

    At the office I see folks in their 20s going for Starbucks on a daily basis, then go for lunches at some nearby cafe. Us oldsters bring in our lunches and eat in a group in the conference room.

    I have learned a lot about the value of money while digging myself out of debt. Now I save and save, and if I spend, I will do so on the really important things in my life. I no longer nickel and dime myself (or loonie and toonie myself) with needless expenditures.

  14. Sweet:) Loved this write-up!

    I am young and I save. Have been saving up since age 12. All due to the fact that I saw my parents talk about money, about savings, about compounding. I saw my mother cook every single meal at home and restricting our trips to restaurants to only special occassions. Thats where I got my education from.

    I am strong beleiver of the adage that ‘Real education begins at home”. Children generally mimic what their parents do.

  15. I think older people tend to be more frugal simply because they grew up in a time where every nickel counted. My grandparents lived through the depression, and both of my parents grew up dirt poor. Every dime they made mattered, so they were very careful with their money — my mom made extra “spending” money by doing loads of laundry for her neighbors at 10 cents a load (this was pre-washing machines, by the way).

    Don’t forget, stores didn’t have their own branded credit cards with zero interest for 12 months, they had layaway, where you bought the item and paid for it for 12 months before they would give it to you. People were “forced” to save in order to buy stuff they couldn’t afford.

  16. I can’t believe that people don’t use registers. Mine goes with me everywhere, since I run my life with my debit card.

    The “device,” if device it was, didn’t bother me a bit. It wouldn’t have occurred to me that J.D. would invent an interchange like this. Why should he?

    Also in re: the banking chapter … as well as the issue of multiple accounts/banks, a few words on tax accounts, business accounts etc would be useful. I set up business accounts for my teaching income, for the express purpose of paying my self-employment tax out of them, and don’t use ’em for anything else; whereas DH kind of juggles money indiscriminately between his business and personal accounts (which drives me crazy when I’m doing the taxes). Is there a preferred method, or one that your average man-on-the-street financial advisor would recommend?

  17. A bank teller? I haven’t been inside a bank since the mid 90’s and I would guess that *most* people under the age of 40 who still do, have financial troubles.

    So, in this case, there as an issue of representative population of the sample groups. I’m in my late 20’s and save voraciously; most of it is automated and the rest is in higher interest vehicles.

  18. I admit that I don’t keep close track of my checking account. I don’t have to, because I never cut it so close that a forgotten purchase could lead to an overdraft. I always have a cushion of thousands of dollars. I do keep a very detailed budget and review all my accounts periodically, but I can’t imagine having to check my balance before making a purchase or paying a bill.

  19. I disagree with the notion that we have more temptations today as a reason for why people may not be saving as much as previous generations.

    Temptations have always existed, just in different forms. Much of what we take for granted today could have been perceived as a temptation in the past.

    Our North American culture evolved into a consumer based culture well over one hundred years ago. Advertisements from the late nineteenth, early twentieth century for goods ranging from electric kettles to automobiles are pervasive in print literature. Toys may have been simpler and electronic gadgets non-existant, but that doesn’t mean people didn’t want things.

    A multitude of factors go into the decision to purchase — temptation is just the beginning.

  20. Thanks, JD, this is a really interesting perspective. Personally, I don’t see it that way but I only have my own experience to go by; this guy must deal with hundreds of accounts. In my case, my 51-yr-old husband turns the theory on its head: he hardly qualifies as “young” he buys lattes and fast food, refuses to keep a check register, and overdraws his account a couple of times a year (it used to be a couple of times a month so there is hope!!) basically reminding me of an irresponsible kid. I think it’s because he was the baby of the family, and treated as such; his parents are excellent with money but somehow never taught him anything.
    I am younger (not really young) and committed to saving, but it’s not easy. Costs go up faster than wages and there is temptation everywhere. Sometimes I will just buy lunch out for no reason, and I’m not willing to put off trips to visit grandparents who may not be around much longer. On the plus side, I can usually pay cash now instead of going into debt, but it still makes saving hard.

  21. @Sunandsunshine: I’m the exact opposite, I learned everything I know about money after the age of 25, my parents could never have taught me how to save because they never learned themselves.

    Personal finance habits may be different between generations–but for some people it’s older people that don’t know how to save. Many people who are immigrants or members of minority groups are mistrustful of “institutions” (government, healthcare, banks), partly because of language barriers but also because of fears of discrimination (sometimes justified)…whereas their children may have different habits due to acculturation. I’d be interested to know what kind of population your bank teller has for customers.

  22. My Grandmother had a huge savings account. It’s true that she was a saver. But, she had also sold farmland she’d owned for 40 years that had slowly turned into prime suburban real estate. She was also very suspicious of the stock market and most forms of investing.

    There probably is a bit of a spending age gap, but a young bank teller might not be a terrific source for determining that. Personally, I think I’m a pretty good saver. My savings are primarily in equities, a rental property, and an online savings account, though. My “brick and mortar” bank only has a few thousand dollars in it most of the time.

  23. @ ezra #12 good point. All of my savings is in online accounts, which the teller at my local branch would never see.

  24. I’m going to jump on the devil’s advocate bandwagon and say that this teller might be missing part of the equation working at the desk of a brick and mortar shop.

    The internet has unlocked all kinds of money management vehicles that is primarily being taken advantage of by the younger generation.

    Where a Baby Boomer might have a a couple financial accounts, a Gen X or Gen Yer might have 20 or more.

    It seems like people my age are more willing to spread their money across a number of institutions rather than pledge allegiance to one bank because the internet has made it so easy to manage.

    Then again, my observations are just as anecdotal as the bank teller’s. 🙂

  25. While a great post, I disagree that it is a generational issue. I know plenty of people who do not fit the sterotype for both younger and older generations.

    Question: will living through the current financial crisis change people’s spending, investing and savings habits the way that living through the Great Depression did?

  26. I’m thinking it’s not so much a generational thing, but a value thing. Of course one might say that younger people have different values than older people, but over the years I’ve worked with many young adults who place a high value on security. And still others who place a high value on status, which often means spending money to have all the goodies that go along with it. Or adventure, which might mean spending money on experiences that satisfy this value. My hunch is that as we age we come around to the other side a bit: the person who valued security feels a little safer about spending money because of what they’ve accumulated. Or the status seeker begins to moderate spending as the value of security becomes more important. But I think all this flies out the window if you were born during the depression, like my dad, or if your parents were born during the depression and they instilled a real fear in you about having enough money. (And sometimes that fear is so deep it’s operating at an unconscious level.)

  27. People don’t use check registrars anymore beacuse most people don’t write very many checks anymore. We use our debit cards for everything but I don’t wip out my check registrar to record the transaction every time I use it, but I generally review it on-line once a day and get my registrar up to date. I also link my checking account to a savings account at the same bank in the rare chance I might overdraft there are no fees charged

    I think studies will show that the savings rate has been horible for years, whether that savings rate is different between generations is an interesting question – find out for us.

  28. A teller at my bank would probably say the same thing if he looked at my checking account. Little does he know I’ve got a pile of savings in ING and several investment accounts. My checking account is just a place for money to stop on its way somewhere else. I keep the balance intentionally low. I have an attached savings kept at $1000 while the rest of my savings is kept in higher-yeilding but slightly less liquid accounts. I’m 25. Maybe part of the generational gap is that younger people know how to use the internet. I don’t keep a check register. I also don’t write checks 🙂 I track every transaction on Mvelopes. I have a big picture view at and track short, midterm and longterm goals. None of this could be known from looking at my checking account statement.

  29. My parents weren’t savers so my grandmother taught me how to save as a boy. I in turn taught my five children who are now in their twenties and saving like crazy.

    It is not really hard to save and makes life a whole lot better. My experience is the same as the teller’s. It’s all the small amounts that kill you. If you want a reasonable return that is safe and liquid try a rewards checking account.

  30. Some thoughts:

    * To some degree, you’re all making a great point about the fact that young people are probably more incline to have online savings. In fact, the main reason I was at the bank today was to pull money out of a brick-and-mortar place to move it to ING. If the teller looked at my accounts, he might conclude I didn’t have much, but that’s because it’s all at ING.

    * Still, I think the audience here isn’t a representative sample. I’m glad most of you are saving, but I think you’re the exception, and not the rule. 🙂

  31. I think both the main theories here are true – that the older generations tended to save more, AND that people tend to save more as they get older. That is, today’s 25 year old will be saving more when he’s 40 than he is now. But he will still be saving less than today’s 40 year old. (After inflation adjustment of course.)

    Also, I’d be willing to bet that older people don’t have $5-6 transactions because they don’t use debit cards.

  32. Hey J.D., I won’t be the exception! You know the people he was talking about that have a TON of small transactions? That’s me. Welcome to my world. I stop at the convenience store and pick up a soda quite frequently. I’ll also eat out for lunch a few times a week. I’ve always wondered what my bank account would look like if I stopped spending like that. Looks like it’s time to give it a try!

  33. I agree with Sam about check registrars not really being used anymore. I use my debit card to do almost all my transactions but am careful to check my balance online at least once a week. What the teller said about the transactions not going through right away is correct. Some of my transactions don’t go through till a week and a half later. So you definitely need to treat every transaction as if the money is gone right then and there. Unless you have a significant amount as a cushion in a savings account that is linked to your regular checking account you should always check your balance to make sure what you have. Online banking is super easy, there is no excuse for not knowing what you have. I suggest at least a thousand or more as a cushion in a regular savings account( which I am currently working on) and an online savings account so that you can actually earn some interest on your money. Brick and mortar banks don’t give you a whole lot of interest anyway. Plus there are a ton of online banks that offer decent rates for savings accounts. In general I do think the savings rate has been horrible for years. I am just now starting to save money now that I am in my thirties.

  34. I think what the teller may be seeing is that older people have more to save and are probably much more likely to come to a bank in person than younger people.

    Fed reserve has data on savings rates. The % of families that save isn’t a lot different based on age ranges. In fact a marginally higher % of people under 35 save than any other age group.

    But people in their 40’s and 50’s are able to save much more than people in their 20’s and 30’s. Older people have higher incomes than younger people. Younger people have kids to support and higher expenses. Older people are more likely to own their homes outright or have low mortgage payments from buying a home 20 years ago. So it may easily look like older people save more simply cause they are in a place in their lives where they have more money and have accumulated more. So these older people accumulate bigger bank balances and look like they save more.

  35. % of families that save per age range as of 2007:

    under age 35 = 58.9%
    35-45 = 56.4%
    45-54 = 55.8%
    55-64 = 58.4%
    65-74 = 56.7%
    75 or older = 49.4%

  36. I don’t know enough about many people’s finances to generalize, so I’ll trust the bank tellers. But I’m going to state that this is not about generations, but general maturity, that sometimes comes with age.

    If our Gen X household looks one generation up, we have one set of boomer parents who ran a law practice for the last 30 years (and still do) who have saved next to nothing for retirement, their house has all sorts of repair needs, and a broken window that lets the cold air in during the winter. The big spender of the couple complains about how expensive the heating bill is. Their home is an empty nest with two occupants, but they have three cars. Two of the three are the same make and model. They did take a transatlantic cruise a few years back, though.

    The other set of boomer parents were public schoolteachers for 30+ years. Both retired over 5 years ago. They have pensions as well as several hundred thousand dollars in retirement and taxable accounts. Their house is in very good shape even though it is more than 100 years old. They don’t work, and spend time with their grandkids.

    With age usually comes maturity, which is probably the key explanatory variable in this issue. But it is definitely not always the case. The behaviors of the first couple above are well documented in the Millionaire Next Door.

  37. Money can’t be saved — it can only be invested. If people think this way, they might make better choices with where they put their money.

    Saving simply implies “not spending.” Investing, in contrast, implies that money is working for you. There’s a difference.

    The same concept applies to time.

    If you don’t address these concepts in your book, do not despair! I’ll mention it in mine (as have other authors)!

    Thanks for the interesting anecdotal observations. I hope your new book is full of them!


    Kent @ The Financial Philosopher

  38. Regarding “it’s all little things” and that the older folks only have big transactions coming out of their accounts: I know that my parents and many in the older generation do not write checks or use a check card for all their little transactions. My parents just take out spending cash once a week or once a month, to pay for groceries, gas and incidentals, going out to eat, or for a big shopping trip (entailing stops at many stores in the mall, for example). I prefer to charge everything on my debit card so I can track all my spending in a more automated way by downloading my statements and sorting things in a spreadsheet.

  39. Given my circumstances, I think said teller would probably lump me into the young non-saver crowd. I keep between 1-2K only in brick and mortar checking accounts and have about 70K liquid in online savings.

    I’m about two monthly utility bills away from ridding myself of paper checks entirely. It just isn’t for me, though there is a little piece of mind in knowing that checks will be processed and an electronic copy stored for later access.

  40. Well, back when college used to cost $50 a semester and housing didn’t eat up 50% of your income, I bet it you sure would end up with older people who think they were just more disciplined.

  41. ha ha, this reminds me of when I was little and thought being the bank teller must be the best job because they trust you to be around much money.
    I’m 32 and have been tracking my balances with quicken, etc, for at least 5 years.

  42. My eldest son definitely fits in the “not saving” group. He gets paid and then spends his money – and overspends too. His younger brother is slightly better although he tends to save until he has enough to buy the latest “thing” that he wants.
    My savings record has always been very poor but at 46 I am working hard on this now. I am currently in the middle of a no-spend month (no frivolous spending) and enjoying it immensely. There are far fewer transactions going through on my account, a healthier balance and a warm, fuzzy feeling that I can do this.

  43. I’m not even 20 and I’ve saved a lot, ever since I first started working at 16 I tried to keep at least a 4-digit number in my savings. I used to buy quite a lot of “stuff” before, too, but now I don’t feel like I need anything at all, and limit my purchases to mostly groceries and experiences (concert tickets).

    But, I do seem to be in the minority for my generation, in terms of how much I save :/

  44. “Young” and “old” are not generations!

    I suspect that the generations older than Baby Boomers are heavy savers. They lived through rationing in World War II, and some lived through the Great Depression, and they were shaped by these experiences.

    Boomers (in general, there are always exceptions) have not been savers. Boomers generally spoil themselves, and believe the world revolves around them; they dubbed their parents the “Greatest Generation” and their children the “Next Greatest Generation.” They (again, these are generalizations that don’t apply to all) expect to inherit their parents’ wealth and to be supported by their children (e.g. Social Security).

    Younger generations, X, and even more Y, may not yet be high savers, for reasons others have mentioned already, but I’d bet they are far ahead of where their parents were at the same point. They see the burden that Boomers will leave, and know that they’ll be paying for it, plus trying to cover their own needs.

  45. I used to be a bank teller and all of my coworkers were in terrible financial shape. I wouldn’t take advice from one if you paid me 😛

  46. And the reason some people don’t have “little things” coming out of their accounts is probably just because they take out a couple hundred in cash every so often and spend that on small things instead of using a debit card. Someone who appears to have nothing in savings may have their savings somewhere with better interest (like a credit union).

    A bank teller sees a sliver of someone’s financial life, you can’t really much extrapolate from that.

  47. As for whether or not the ’08-’09 financial meltdown (the Great Recession) will change our behaviors…I look at it as a blessing since it has scared the wits out of us! We have been working VERY hard to beef up our accounts and it’s all because we feared a full-blown economic depression. We’re entering our 40’s and have never before been so motivated to save. This ‘new’ mindset for us is here to stay, BTW. And with the nos. of jobs lost each week, a depression may be looming on the horizon; hold on to your wallets, we may be in for an EVEN MORE bumpy ride!

  48. Here are some links which explain banking and money:

    7 Page article in The Times on Goldman Sachs

    Article in Rolling Stone on Goldman Sachs

    The great American bank robbery:

    How banks gained control of America:

    How to fix bad commercial banks that take in money from depositors. Simple. People power. The Dutch brought an arrogant bank to its knees in twelve days:

  49. Excellent post! It IS the little things that kill your savings. Years back I switched over to cash for the little things that I have to spend money on. I never spend change. I always break a dollar and keep that change. Every week that extra left over goes into the ing account.

  50. Well I can speak somewhat for the previous 2 generations of my family. I’m 35, my parents are 64, and my grandparents (who are now deceased) were born in 1915 & 1917 My grandparents were the depression generation. I think it’s fair to say they always saved. They were scared not to. My grandfather was a teacher and my grandmother worked part-time in an office. They ended up being quite comfortable because they saved. They had a nice home, reasonable cars, nice furnishings, clothes and jewelry. But they didn’t have a lot of crap – the things in their life were well thought out, quality purchases. In other words despite their comfort in life they didn’t spend unwisely.

    My parents were savers because they didn’t have access to credit at a young age. They also wanted to buy a home and the only way to do it was to actually save 20% for a down payment. They couldn’t get a credit card if they tried (not at least until the 1980s). It was also nearly impossible to take out a HELOC. So they saved – they didn’t really have much choice. Things changed around the 1980s though and credit became much more attainable and my parents did start to spend more money and use credit. But because of earlier savings they have maintained a comfortable lifestyle.

    I think that is what separates the older generation from the younger one as far as saving – its the economic climate they grew up in. I’m not sure older generations were any more financially literate than younger ones they just had a different perspective and fewer financial “tools” at their disposal. The Depression generation knew that if they didn’t save they could be out on the street. The Boomers had a hard time getting credit and easy mortgages and squandering money, try as they might. But bankers and lenders have wised up since the 1980s – they know how to manipulate us and make financial literacy something that is hard to have – they’ve made credit easy to get and finance complicated and difficult to fully comprehend.

  51. I also agree with Ezra #12 and J.D. – I have relatively little in my B&M bank accounts, but have several ING accounts with various amounts for various purposes. I deposit my checks at my B&M bank, but then once they’ve cleared, if it isn’t for immediate bill paying, my savings and emergency fund, etc. go into my ING accounts. So it might look like I have a total of $10 to my name, but that’s not actually true. I especially like this format b/c I am less likely to spend the money once its at ING.

  52. I think saving is generation-influenced, but also temperament-influenced. I have a Master’s in psychology (not that I know everything, by a long shot). It is clear to me, though, that some people in all age groups are wedded to immediate gratification, and some people in all age groups are able to delay their gratification, at least sometimes. I’m with the savers in the latter group. . . our living below our means has enabled my household to remain happy and unruffled as my employer has enforced my first unpaid furlough days. More at

  53. But where did the younger generation learn its spending habits from?

    Surely these habits didn’t develop in a vacuum. I think the REAL issue is that the older generation did a terrible job of transmitting any saving values to the younger generations. Young children don’t have money; they don’t have jobs until well into their teenage years. So where were they getting the money to spend and develop poor habits in the first place?

    I am going to have a point my finger at this generation’s parents. I am 20 something and remember how overindulgent my peers’ parents were: if their children wanted a cell phone, a credit card, designer clothes, a car, they got it, regardless of the parents’ ability to afford these luxuries. Because these parents had such a hard time saying no, and in a way the parents themselves were concerned with keeping up appearances, they spoiled their children. It is of no surprise then that this generation might not have appreciation for the value of a dollar or of saving. Their parents just seemed like money trees and everything was about instant gratification.

    I think the real problem is with the parents, many of whom may of grown up broke without having much, who subconsciously or not did not want their children to have to endure the same. After all we weren’t the ones to cause this economic crisis, which was brought on in part by the over-indulgence and over-consumption of our parents, who were buying homes they could not afford, racking up enormous amounts of debt, looking the other way when it was clear that their lifestyles were not sustainable. Our parents and grandparents did that. And passed most of those bad habits on to us. And now we, the same young generation so often demonized, are left to clean up the mess and attempt to basically undo everything we have ever learned about money from our parents. So please try to characterize the behavior of the younger generation relative to the good savers of the old days in context. Otherwise, the comparison is meaningless.

  54. I liked KC’s comment, #52. Spoke my mind perfectly.

    I’d only like to illustrate the difference between finance which absolutely is complicated and personal finance which is extremely basic (and really more like accounting with a little knowledge of investing thrown in).

  55. I completely agree w/ #46. I work at a credit union and we generally don’t assume that our CU is the only account a person has. We’re always striving for a greater share of a person’s “wallet”. So, a single teller’s view is pretty limited as to a person’s total financial picture. From a savings/checking acct standpoint, there doesn’t seem to be that much of a generational difference. The people with the least tend to be young families whose wealth is completely sapped up by their 401k and mortgage payments. Elderly do have the most in the bank, but mainly because their local bank or CU I the only place they know to put their money and CDs the only “investment” they trust. Plus they’ve simply had many decades to save up. In terms of saving as a percentage of income, I definitely think that Gen Xers save a higher percentage than the Baby Boomers did at their age. This mainly seems to be due to the fact that none of us believe we’ll receive a pension or social security, so we’re relying 100% on ourselves to fund our retirements. My parents retired a few years back with a generous pension and are just starting to tap into social security. They also have small rollover IRAs they eull never need for income. DH and I are 30 years younger, buy have the same amount already built up in our 401ks as they had at retirement because we know that, unlike our parents, we won’t have those cushy pensions. And we continue to save 10% (w/ 5% match) in there because we don’t want to be destitute at retirement.

  56. Saying that all older people are frugal and have money in the bank is almost funny. I know plenty of people in their late fifties who are living for the day they turn 62 so they can get social security. If so many have money in the bank- then why do so many depend on social security for their living expenses?
    The ones who go to that teller’s bank are probably the only old people he knows!
    We started really saving for retirement at the age of 40. We will not be wealthy- but we will have enough to live the lifestyle we live now. Your highest saving years are your late forties and fifties-when the children leave the nest and you are an expert at…something!
    I’d like to hear about handling multiple accounts at multiple banks without carrying a huge ledger!

  57. I found that when I was in my mid twenties there were two primary things going on with myself and my peer group.

    1) We were establishing ourselves. First major full time jobs, first marriages, first apartments/homes, etc. All of that takes money to fuel. Sadly people often use other people’s money to fuel this and end up deep in debt (including me).

    2) Lots of energy and enthusiasm and a “do first, think later” attitude. If you covered your rent, covered your bills, the rest was meant to be spent on nights out, toys, etc. or at best saved for short term needs, e.g. vacation, christmas. You could, after all, be dead tomorrow, so why save for something that may never come?

    As most people get older, they don’t necessarily need so much stuff since they often have plenty.

    That is usually followed by some type of incentive to wake up and look beyond the immediate and consider you may live to 65, and it would suck to have nothing but useless stuff surrounding you then.

    I think for most folks, they just don’t pay attention or worry about it and those habits stick with them until something changes, externally or internally.

  58. I feel like I’m kind of at a middle point too. I did overspend a lot when I was younger, and got into debt – not to impress others, just to indulge myself. I wasn’t a spendaholic or anything like that – I simply didn’t think much about the future. Now I’m in my mid-30s and save everything I can, but I’ve got a lot of lost ground to make up if I want to be financially comfortable in later life. I should be able to do it if my business continues to grow as planned, but I wouldn’t have that option if I was in a regular job with small annual salary increases. Still, I do envy those who start saving early on and stick with it!

    I’m not convinced it’s entirely a generational thing though – my dad never saved & was usually in debt as a result of his expensive hobby (motor racing!). My mother was more of a saver, as were all four of my grandparents, but I didn’t really pick up any financial guidance from them. I think some people are just more sensible at a younger age than others.

  59. I think older people often didn’t have a choice but to be more responsible because credit wasn’t as readily available as it is today.

    My husband’s only 7 years older than me, but he said there was a time when the only card he could qualify for in college was the sears card. By the time I hit school I had access to as many cards as my heart desired.

    All things being equal (such as age, etc), I don’t think people are any dumber now than they were 20 years ago. They just had more restrictions on how much credit they could access.

  60. I’m 28 and my husband is 31, and we have $70,000 in a high yield online savings account we call our “house fund” and another $50k or so in retirement savings. We used to keep a budget and keep track of spending but I realized one of the benefits of being obsessively frugal and having lots of savings is you don’t have to keep track. I buy most everything with a cash rewards credit card and pay it all off at the end of the month and never worry we won’t have enough money. I’ve saved since I started selling candy on the bus and flowers to my neighbors in elementary school.

    The interesting part is it comes naturally to me; my dad grew up extremelly poor and did well for himself as he got older, but he did a great job instilling the value of money and savings into me. The idea of being in debt is foriegn to me and I worked while putting myself through grad school so as not to incur debt. My husband on the other hand learned nothing about money from his family and went $10k into debt after overspending a 6 figure insurance settlement. The first thing I did when we got married was use half my life savings to pay off his debt. He is now much better with finances and I encourage him to read blogs like yours.

    I think saving when you are young comes down to simply living beneath your means and avoiding debt. I make a good salary now but my husband is a student and we save a good 60 or 70% of our income every month. We live in a small townhouse, have no car payments, and just don’t spend a lot of money. It helps that we have no student loans – other young people I know who don’t save are saddled with hundreds of dollars a month in student loans that they struggle to pay off. I don’t know if it’s a generational thing, perhaps it is more of a mind set thing – some people get much more excited about seeing their savings grow than about buying a new toy, while to other people saving seems pointless.

  61. I don’t agree either. I think there’s this tendency to assume that older generations are older and wiser and younger ones are more reckless and disrespectful. People my generation (Gen X) didn’t invent overspending and consumer debt.

    The bank teller only sees me when I need change for the laundry machine. When I do have to line up, I’m seldom in line with people who are under 50. (Business owners have their own line). Perhaps it’s a generational thing how they do their banking?

  62. The “Gap” is really the age at which one reaches self-reliance, and accepts the fact that no one is handing out prosperity.

    Like many teenagers, I thought my parents were cruel, knew they were poor, and figured I could do at least as well on my own. My after-school job barely covered rent on a tiny apartment, but I managed to finish HS, then work through college on a diet of beans, rice and beer.

    It took 15 years more to learn to economize, the hardest years of my life. Another 7 to meet and marry one who shared a passion for fun and frugality. Now at 55, she at 61, we work just to keep from spending savings on healthcare.

    Our $800,000+ savings spreads over 22+ accounts because, well, every extra 5 grand got stashed into whatever bank offered the best APY.

    Yes Bonnie, all in CDs because it took 5 years to recover all we lost after the 9/11 crash. Liquidating that brokerage account paid for our custom home where we hope to enjoy a relaxed retirement.

    Did I mention 2 previous homes as rentals? Should prove to be an inflation hedge, paid off, of course.

    My friends ask, “What good is it to have money if you do not splurge?”

    We sleep well with no worries.

  63. Where to begin???

    First, I don’t agree that its “all the little things” that break people’s budgets, I’m very much in the big ticket expenses like medicare, housing, cars, vacations are what break people’s saving ability. The “latte factor” is SO TIRED, your blog is better than that JD.

    Second, why on EARTH would I put my savings in a brick-and-morter bank??? The savings rates in their best savings accounts are about .25%/year to pay for the convenience of having a stupid teller that I don’t need, because I live in the era of the internet for online and automatic deposits and bill payments.

    Ally bank is 2.0% interest right now, more than a lot of brick and morter’s 5 year locked in CD rates. I would never keep sustantial balances in a brick-and-morter bank and if YOUNG people are actually smart they will take any large funds after emergency savings and stick it into mutual funds or bond index funds or something, not let it earn less money than inflation.

    Third, the “folk wisdom” from the wise bank teller story here leaves me rolling my eyes. Its corny and preachy, and for the points above its also not very wise.

  64. Just a couple of thoughts. I have the bulk of my cash savings in an HSBC direct account. The local bank only sees the money for the couple of checks I write and my spending money. That alone is enough to skew perspective. A further thing tho, the banker talks about “a lot of $5 or $6 transactions”. This is because older people like cash, while those of us who grew up with easy debit/credit cards have less problem using them. This looks different to the bank account, but the end result is the same.

  65. Two things –

    1) The “older generation”, at least from my experience, saved up to pay for things like cars, furniture, etc. Perhaps that’s why they have more in their accounts.

    2) I remember as a kid my parents getting a couple hundred in cash for grocery and spending money each week since debit cards weren’t around and checks are just inconvenient. That’s probably why the teller sees large withdrawals and not the more frequent, smaller amounts for that age group. Not saying either is better, it’s just what we’re used to.

    Hmmm, I wonder what my local bank would say about us? We have our paychecks direct deposited, then almost all the money either pays our bills for that 2 week period or goes elsewhere to be saved/invested. We only keep about $1,000 in there for our immediate emergency needs.

  66. I think the ease of spending and the ease of access to your money has caused people to not save. Well, for the most part. Its easier to spend than it is to save . . .

    In today’s society, it’s super easy to get cash –just go to an ATM.
    It’s super easy to spend frivolously –on your credit card/debit card.
    If one card doesnt work, pull out another one . . .

    Not that long ago, it was acutally HARDER to spend, I think, thereby forcing you to make a more thoughtful conscious decision to purchase an item.

    You had to go IN the bank. Wait in line. Fill out a withdrawal slip. And THEN you would get cash. And you had to do this M to F during banking hours. There was no automatic deposit of your paycheck, you had to go to the bank to deposit it, making you more conscious of it. If you wrote a check at a store, you had your check register if front of you and you KNEW if there was no money there. Credit cards weren’t that easy to get in the first place . . . and if you did have one, you usually only had ONE card.

    I think that if you went to Starbucks and had to pay cash each and every time I think overall less people would pay for the drink. Swiping a card is SO easy and so people do that, without really thinking.

    With the ease of the whole spending process . . . it’s harder to save?

    *shrugs* Just random thoughts . . .

  67. I’m 26, and while I may not be a good representational sample, here’s some things that make me think the teller’s perspective is skewed:

    1) As many commenters have mentioned previously, we are a generation that is much more likely to jump onto the online savings bandwagon. We trust technology more and automate more. As a result, very little of our actual savings end up in a brick-and-mortar bank, and we are far less likely to walk in to the brick-and-mortar bank in the first place.

    2) We’re just starting out in our lives. Many of my peers (including me) are still going to school of some kind, and even if you take loans, school hours can limit your ability to earn as much, and therefore save as much, as your older, established peers. Even once you graduate school and get a well-paying job, some of us then turn around and take on a mortgage. Even if it’s a sensible mortgage (1/3 or less of your monthly income, downpayment, etc), it often costs more per month than rent, and you buy a house you can grow into, meaning the older generations are earning more with the same mortgage payments (or sometimes have been able to pay the mortgage off). I agree with a few commenters who mentioned that we’re probably saving more than the Boomers were when they were our age.

    That being said, some of this does have to do with a difference in attitude. Some of it is probably generational: those who grew up in the Great Depression learned to save out of necessity. However, I’m not so sure it’s mostly a generational issue… sometimes it’s just a maturity issue. Some people will grow up when they have kids, or when they get into financial trouble. Some people will never learn to save. My 42 year old coworker just borrowed from his 401k because he can’t pay his bills from month to month (like his pricey OnDemand cable bill which he watches on his shiny, huge flat screen TV, for example), and now wants to use the money to buy a new car. He makes fun of me constantly for saving, figures he’ll deal with the future when he gets there, and hopes to soon marry a rich lady who will end his financial troubles.

  68. I don’t necessarily think we can assume that older generations saved more than the younger ones of today. It’s sometimes easy to look back and say, “Oh those were the good ‘ole days.”

    However, my husband and I were in our bank the other day, at a grocery store, and I was depositing a check into the ATM. My husband walked up and just glanced over the should of this older guy on the computer checking his balances. He was maybe in his 50’s, and looked a little shabby. He wore a backpack and looked like maybe he hadn’t bathed in a couple of days. Who knows, maybe he had just returned from hiking. But the point is, my husband was astonished to glance at his bank balance (he shouldn’t have done this, but he is nosy sometimes) and this particular fellow had close to $200,000 in the bank.

    I made a point telling my husband that it’s always the people you least expect that have saved their money. It’s not the ones with the fancy cars or clothes.

  69. I think that the main difference between generations is simply access to credit. It’s simple, but it’s made a huge difference in how we view savings and spending versus our parents and their parents. I read somewhere that before the Depression, people had to put down 50% of the purchase price of their house to qualify for a mortgage. In the housing boom you didn’t have to put down any. Therefore, our parents and grandparents had no choice but to save for things.

    Now that credit is so readily available (and it still is, just not at the ridiculous levels it was 2 years ago) and we’re not forced to save for things, our attitude has changed. People are generally the same given the same circumstances and incentives. If our grandparents had access to easy credit, they would have made exactly the same choices that our generation does.

    And no, this crowd is not representative of our generation(s). We read personal finance blogs and have a deep understanding of the importance of saving.

  70. Sorry for returning late to the party. Thanks for addressing my point JD, although it looks like my opinion was not shared. It’s often been said that dialogue is the hardest thing to capture… Or maybe I just got up on the wrong side of the bed yesterday.

  71. I have to jump in and be another voice supporting the point of Ezra (#12) and a few other commenters after that.

    My parents set me up with my own savings account when I was little, at the same bank they had always used. When I was a bit older, I got a checking account there too. By the time I was in college, after being a customer for 15 years, I realized that my savings interest rate was .3%, a pittance. I was basically laughed at when I asked about a higher rate, or a money market, since I didn’t very much money. So I moved the savings to HSBC, which at the time was offering 5.25% on savings with no minimum to open. I also cranked up my 401k contributions, which is done with a bank I will never set foot in, and I’m now looking at opening an IRA, which will also be with a bank I’ll never physically see. All that’s left for the brick and mortar bank is my checking account for daily spending and monthly bills, attached to my debit card. My mother and both of my girlfriends parents don’t even have debit cards, and are great examples of people who do almost all of their banking in person, at a brick and mortar bank.

    I won’t say that the claim that younger people don’t save enough isn’t true, since it most definitely is. It’s very true. But as a younger person, the last place I would look to save is at my “traditional” bank. And I have plenty of friends who are in the same boat; once they hit that point that they started to really examine finances, moving away from brick and mortar banks is commonly a next step.

  72. I’m a 29 year-old former bank teller and what really struck me was that the bank regulars were the broke people. They were constantly shifting small amounts among accounts, taking out small amounts, making and paying small personal loans, etc…

    I realized that rich people aren’t regulars. The people playing the CD game are the elderly who have either cashed out stocks/MF, or never used them and always trusted the bank. Large amounts in traditional banks always said unsavvy investor to me…

  73. I like the Teller’s observation about check registers. I carry mine with me so I can write checks if needed. I balance it immediately and weekly I make sure it coincides with my online balance.
    My husband never carries his checkbook and quite frankly doesn’t know how to balance it (he doesn’t check off items that have posted). So I do it for him. I would feel naked without my checkbook, even though I pay almost all bills online.

  74. JD’s most interesting posts are the ones where he talks about conversations he’s had, and these are most genuinely the root of GRS — one guy talking to people and learning.

  75. I think it’s interesting to see how frequently people of my generation (I’m 25) get uppity when anyone mentions a generational gap that favors the older generation. Such gaps could never (and aren’t meant to) encompass every outlier. Although there are people in our generation who are taking control of their finances (my husband and I included – after making some bad choices initially), it’s not the norm.

    Just like there are plenty of people in our parents’ generation who didn’t save. However, I would venture to guess that almost everyone in our parents’ generation actually knew how to use a checkbook register…something that’s foreign to many in our generation. I, for one, know plenty of people who live by their ATM slips or online balances and can’t seem to grasp the concept of a budget or of finding some way to keep track of their own spending.

    And I know that none of them have online savings accounts not visible to bank tellers. They just have what’s there at that one bank in that one checking and one savings account. So at least in my sphere of living, the “norm” is exactly as this article puts it.

    Those in our generation who are doing things right should be thankful that they’re figuring it out and not taking articles like this as a personal slam against them.

  76. Hey J.D.,

    People are saving more than ever (both young and old) – it’s just spread throughout all the options we have now.

    I agree with Ezra (comment #12) – us young folks are saving like any generation. We’re just putting them into many different baskets available now, as opposed to only having one choice many years ago. So it might look like there’s less saving going on in traditional bank accounts, but online accounts are huge.

    It’s the same with music and video. More people are listening and watching then ever, but radio listeners, CD sales, TV viewers, and movie theater goers are all going down. Before, there was only one channel through which to consume music and video, but now it’s all spread out and online. You just can’t track and immediately see it because of that.

    Good question you raised,

  77. I’m 22 and in grad school. I always keep a buffer in my checking account (at least $500, though I try to keep it closer to $1000) and I do this by somewhat obsessively saving money. As a result, when I moved here for school, I was able to handle the security deposit, startup costs, etc. with no problem. A few months later when my colleagues arrived, by payday in September, most of them were down to less than $20 in their checking accounts; when I was at the same point, I had several hundred, at least. Soon I will start paying on student loans, so while I can’t save as much as I’d like, I’m starting with about 10% of my after-tax income.

    Then again, my parents are also obsessive savers, but it allows them to handle unexpected expenses such as a dead oven without worry. Personally, I’d rather have the peace of mind knowing that I can get my car fixed if it breaks down than a brand new HDTV.

    I should also note that I’m not taking this personally. In fact…I agree that my generation is mostly financially illiterate. I’ve heard the phrase “It’s financed, so it’s okay!” too many times for my liking.

  78. I have to wonder if this is less an *age* thing as it is an *income* thing (noting, of course, that incomes tend to increase as one ages).

    From my own personal experience, the people in my life that are good with money and want to save are the people in their 20s and early 30s with average and above average incomes.

    The people in my life that are TERRIBLE savers are in their 40s and 50s and make 30k or less.

    It is hard to save when you are poor. The folks I know with lower incomes feel like it is hopeless to even try to get ahead, so they play the lottery instead and use what precious little they have to try and medicate the feeling of being “poor”.

    Granted, this is just my experience and not a scientific study or anything.

  79. @Sayjaybay, what is the purpose of a 5-year CD? It can’t be for an emergency fund. I guess if you want something as safe as a CD, then stocks are out. So why not put it in Treasuries? I believe they pay out more than 3.5%.

  80. There’s too many variables involved to simply call the concept of savings a generational one. A person’s nature, family life, personal values and the influence of peers all comes into play.

    My buddy has a saver for a dad, who opened an investment account for my friend at a very young age. At about 9 years old, my buddy was telling me about his fund that tracked the S&P 500… while I’m telling him how awesome my Transformer collection was.

    My parents weren’t (and still aren’t) savers. But that one conversation with my 9 years old buddy stuck with me until now, at 33, I have a very healthy retirement portfolio and am in the process of closing on my first home – one that I am putting 20% down on and getting at an incredible rate on a 30-year fixed.

    My parents are going to struggle more and more as they approach retirement age. Part of why I save with a vengence and am conservative with my non-retirement investments and purchases is because I know that one day, I will likely need to provide some major support for my folks.

    I think the key is to find out “what works for you”, like J.D. always says. My wife and I choose to be financially savvy because it works for us, and our plan is to spend well on what we love, be frugal on everything else, help our families as needed, and hopefully retire early. Others in our generation choose differently, because they can afford to, or don’t care about early retirement, or for whatever reason otherwise.

    But I wholeheartedly disagree that financial intelligence is generational.

  81. I agree that it’s not an age thing, baby boomers spend a lot, that’s why most of them can’t retire now.

    But I’ve been much more frugal lately, and its funny to look at my ING when it has days in between purchases. I used to have a lot more day to day small things. I’ve always saved, but I’m managing to still save on a much smaller income.

  82. @Suzanne,
    Its the 2 yr, 2% rule:

    If you can do without your money for 2 years, go for the longest term at the highest CD rate available. If you get 2% more than a 1 yr CD, you can break the CD after year 2, pay the 6 mo. interest penalty, and still have more than a one yr. CD. over 2 years.

    Do the math, remember: It is your money, do not be afraid to go to the bank and get it back.

    In 2002, I broke a $60,000 CD with Capital One with no penalty, sending a well-crafted letter to the VP of Marketing.

    If you can lock up savings for 2 years, go for 5 or more. After 2 years, you can break the CD, pay the 6 mo. interest penalty and still be ahead vs. 1 year.

  83. Ha! The folks at my credit union probably think I’m a terrible saver because I have something like $50 in my savings account and only a couple hundred in my checking account at any given time (unless payday has just happened and I haven’t paid my CC for the week yet). However, I save somewhere in the neighborhood of $1700 each month on a $50,000 salary. Some of it gets pulled out pre-tax for my 401(k), but the rest is automatically pulled into my ING savings account. Little does my credit union know I’ve got almost a year’s worth of gross income in my savings account alone!

    That’s okay, though. I don’t need people in my “real” life to know that much about me 🙂

  84. You know, JD, I’m pretty sick of being blamed for not saving enough because I’m of a “younger generation”. By framing it that way, it glorifies older people and makes younger people look lazy, undisciplined, and uneducated. The problem is much deeper than just older vs. younger — I won’t bother to go into a long winded analysis because that isn’t warranted here. I think that you are out of touch with the struggles of of the 20-30/35 range — the fact that you actually go to a bank proves that. I suggest that you find a variety of 20-30 yr olds and interview them about finances to find out what is really going on.

  85. Hello everyone!

    Just wanted to chime in concerning the conversation about using a register. I am so weird in that I actually love working hard to increase income and make solid frugal choices for my expenses etc. etc. BUT I HATE (I MEAN HATE), tracking my expenses (I have been semi-successful in doing it in the past — I just despise it with my entire being).

    My solution (that might work for others on here that are like me):

    I have a credit union checking account that has a $1,000 line of credit that is only used when my checking account goes into the negative. There is no transaction fee for this service — just a tiny interest charge (think simple interest installment loan) that applies to the balance until I pay it off.

    I have lots of money pulled out for ING savings and a collection of Roth IRA / 401k accounts. I also work like crazy to educate myself and achieve higher levels of income every year. I can’t tell you the peace of mind this little $1,000 line of credit feature has brought me.

    I don’t worry about over-drafting my checking account — because the $50.00 or so, “in the red” I am, is only assessed $.012 in interest or so (depending on how long I let it stay, “in the red” until I pay it off).

    BTW I look at my spending patterns online ONCE a month (no more than that — I HATE IT remember?) just to make sure I am not overspending in a certain category.

    This works GREAT if you hate tracking your spending — but are already pretty frugal. You can achieve all of your savings goals and spend as you normally would throughout the month — all while not having to stop and jot down expenses etc. (which you must reconcile with your bank etc.). :shudder: I am having bad feelings just talking about it haha!

  86. Great post. I didn’t doubt for a second that it was true. I agree with a lot of commenters who have distinguished between Baby Boomer and Greatest Generation “older folks”, who have very different saving habits.

    I find it amusing, however, that their financial success has been 100% attributed to inherent “characteristics” of their generations. Never mind the fact that the GG had stable career-long jobs, paid proportionally much less for housing, and were able to depend on pensions when they retired. They are called financially responsible. The BB grew up and entered the workforce in a world where pensions were guaranteed and benefited from skyrocketing housing values, but both of those rugs have been snatched out from under them. They are called financially irresponsible.

    When will people begin to see that public policy, corporate regulations, and taxes have an impact on our wellbeing? Maybe it’s easier to blame others for society’s problems than to advocate for actual change.

  87. Like previous posters, I appear poor to a teller. Our “real” money is in ING.

    This “I can’t see it, so you don’t have it” attitude led me to a near shouting match with a 401k representative once. He condescended to me about my lack of diversification, despite my telling him I was using several investment vehicles (401k, Roth, personal investing, real estate) and was diversified overall. I finally told him anyone unable to see the big picture wouldn’t be handling my portfolio anymore.

  88. I have to agree with Leslie back at comment #2, there are more temptations today. That’s a significant factor. But there are others.

    Today we have electronic money, we don’t see it, feel it or even smell it the way the people of previous generations could. That makes a difference. Studies show that people will spend more when they’re paying by credit card than they will if they have to pay cash, probably because a plastic/electronic tranfer doesn’t quite ***feel*** like you’re spending money.

    Also, for previous generations (including many of the current elderly) saving money was a survival skill. Periods of unemployment were expected, and they had to be prepared. We’ve had a good run for the past few decades, so the idea of having reserves against disaster has kind of faded out of fashion. We’re a bit insulated by complex systems and have come to view serious hardship as something in the history books.

    Time will tell if that thinking is correct, but I wouldn’t bet on it.

  89. Wow…great discussion. I wish I’d seen the post earlier.

    My co-worker and I are almost the same on paper, even born with a couple weeks apart (we’re 40). We talk about money a lot. She has a house, savings, and is frugal. I’m frugal, but still trying to get out of debt from my 20s (Almost there…thanks the tips JD!).

    The difference? Her mom instilled a bit of wisdom that IT IS BETTER TO BE POOR WHEN YOU ARE YOUNG THAN WHEN YOU ARE OLD. She heeded that advice well, and wish I’d had a mother that wise.

  90. I think differences between generational finances is too complex to outline in a single blog post. Each generation will have its share of pitfalls and it is next to impossible to quantify without breaking down behavior differences and situational differences as has been pointed out, for example: brick & mortar vs online banking, cash vs debit cards, savings as an absolute value vs %age of income, or retirement vs non-retirement savings.

    The WWII generation had a mentality of putting your head down, working hard, living simply, and saving as much as possible because many of them were deeply scarred by the Great Depression. This has led to many good and bad behaviors. We might think it is silly to bury gold coins in your garden or stuff cash in your mattress, but none of us have lived through the sheer panic of the bank runs like our grandparents did. But that led them to often working for less than they were worth because the important thing was simply to HAVE a job, even when times were good they never changed that attitude.

    Many Boomers picked up on their parents’ paranoia. My mom still scrapes the remaining whites out of the shell of an egg because that is how her mother taught her to cook. On the flip side for their whole lives social security, medicare, pensions, and significant inheritance has been an expectation they have always known. In my experience Boomers have a tendency to be one or the other, like their parents, or living in Neverland (i.e. never growing up and taking financial responsibility).

    Most people I know in their 20s and 30s are one or the other as well. Though the ones that haven’t grown up I still expect to, after all they have the excuse of their relative youth. But I don’t know anyone under 50 who expects social security and medicare to be there when they retire (at least not as anything more than a small supplement). Some have pensions, but if they are thinking of retirement they watch the stewardship very closely. In some ways we are more ignorant and we have vehicles that can get us into trouble very quickly (CCs, HELOCs, etc). But in other ways we are more savvy, chasing savings interest rates and a higher comfort with stocks and reasonable amounts of risk.

    On the whole I think our culture is moving away from a culture of self responsibility, and that is felt across all generations. We have traded looking toward the horizon to staring at our belly buttons, whether we trip and fall or look up in time to change direction remains to be seen.

  91. This article made me think of my late mother. When I was growing up in the 60’s, we had only 1 car, lived in an incredibly tiny house, and lived on my dad’s factory salary. Every January, we would head down to the bank, and she would pull out a $20 bill, and add it to her Christmas Club. Every month, for the rest of the year til November, she would do the same. End of November, the bank would send her a check for about $200, and she would feel positively rich. We’d have a wonderful Christmas, and in January, the process started again.
    I think that was a wonderful lesson for me…save it up before you spend…plan far in advance (Christmas does come around every year, after all!), and little amounts do add up over time!

  92. If the bank teller can look at someone’s account history and see all the little $5 and $6 transactions, he could also look at my account history and see my significant number of transactions TO Vanguard and ING, and only two transactions per year FROM my ING (to pay property taxes). So I think the bank teller could very well assume that I am a saver!

  93. JD

    I don’t agree that it’s simply a generational divide that accounts for a lack of savings. As others have mentioned there are many factors, such as the influence (or lack) of parents or others at a young age, the greater availability of credit the length of time that’s passed since the Great Depression and WW II.

    Having said that, let me also add some that there are some other factors – a change in values and a lessening of the stigma associated with bankruptcy – that are at least partly driven by a generational change. As a society we seem to place less value on things like thrift, sacrifice and being content with what we have. We embrace lifestyle inflation. We want instant gratification. We are less inclined to have the patience or discipline to do something quaint like save for a 20% downpayment on a house, or for a car, or even a TV. And if we get overextended and really mess up our finances, we’ll just declare bankruptcy. It will be embarassing (for some) and it will play havoc with our credit rating for a few years, but it won’t make anyone a pariah.

    Obviously, I’m making some generalizations – there are still many that value thrift and would be mortified at the prospect of declaring bankruptcy. And there are some instances, such as lack of health insurance or the financial misdeeds of a spouse (or unscrupulous mortgage broker), where bankruptcy is the only option. But these seem to be more the exception than the rule these days.

    I think the following phrases illustrate the change in values. Today’s “instant consumerism” prompted someone to observe “whoever dies with the most toys wins.” Those that embrace the “old” values can identify with the following Latin phrase – “quod cupio mecum est” – “what I want, I already have.” And they probably paid for it in cash.


  94. JD — For the record, it seems authentic to me. I wouldn’t doubt your writing on the account of one comment.

    Reading through some of the comments, I’m feeling kinda guilty. My mother-in-law is here visiting for a couple of days. Well, she surprised my husband saying she was going to buy us a new tv for his birthday & our Christmas. Okay, I was thinking $750 or something. I had a nice, little 32″ Samsung LCD picked out.

    To sum up the story without sounding braggy — we now have a 46″ Samsung LED tv. (I don’t mean to sound like I’m bragging, just saying.) We would have NEVER gotten it for ourselves… Much too pricey and too many other things the same amount could buy.

    Funny enough, we’re like the last of our friends to upgrade our tv…. It wasn’t ever something I thought was necessary. I nearly had a cow thinking that this tv could 1, pay off my car loan or 2, buy the new engine for our 240. However, it is a gift, and very much appreciated as such…. I just feel a tad guilty over the extravagance.

  95. There certainly is a savings gap. As an underwriter, I see it everyday.

    One key point that gets lost is that anyone with a steady income can save. It doesn’t matter if you are young or old, make minimum wage or are so far up the corporate ladder that you fire up your Cubans with $100 bills.

    I think the problem with low income earners is they simply don’t think that what they can save will amount to anything. This is dead wrong. Invested wisely, saving a five spot a day over 30 years at 5% turns into approximately $127,000 (depending how it’s compounded). This is much better than a daily latte, movie rental, or lottery tickets.

    The problem with high income earners is that they tend to light their cigars with $100 bills — or their personal equivalent. They’ve spent the past 15 years or so riding the gravy train and think the money will always pour in. This mindset, however, may be changing with the current environment.

  96. Right-O Thrifty Grad! Patience & discipline turns a tiny savings into a comfy cushion.

    Good point Little House (& others): Shabby fellow had $200k. Many who look wealthy have mostly bills for their fancy things. And some who look pitiful are prosperous. Didn’t billionaire Sam Walton drive an old pickup truck?

    This board is fun, but there have been studies on this subject. “The Millionaire Next Door” comes to mind. [Stanley & Danko, 1996 I think, don’t know where my copy is right now.]

    Basically its a study of how ordinary people earning $40-50k yr. can amass a net worth of $1M by spending way less than what they earn. For example, in Texas, these self-made success stories call the wanna-be a guy with, “…a big hat but no cattle.”

    After the first couple of chapters on such antecdotes, it bogs down with lots of statistics, but the premise is valid and inspirational.

    From the book, I belive the data on generational millionaires supports my original post: you become prosperous when you decide to make it happen, quit waiting for that lucky lottery or government grant.

    It seems that a majority of millionaires who inherit a fortune lose most of it in the second or third generations. Those who earn their mark and teach their scions to save have fortunes that are retained over several generations.

    There’s your gap.

  97. In my early, early 20s, I think I’m the youngest commentator here. So of all the comments here, I think Mya’s (#56) rang the loudest (in terms of generational saving).

    You can’t acknowledge that younger individuals don’t save as much as they could without bringing up the fact that they haven’t learned or been taught that knowledge to begin with. And I’m not speaking for every one, but I think it’s evident the issue is bigger than most people consider.

    Another issue to consider is the way modern banking has sort of evolved. We’ve got a unique system, that, if used properly makes it so that you never even have to go into a bank to bank anymore. And true, this does make it easier to overlook one’s balance (compared to physically being in a bank & having someone tell you what your balance is), but it also goes to show that people with the teller [from JD’s bank] mentality take anecdotal evidence from one or two examples without taking into account other factors. For example, what if for every 2 young people that came to the bank, 5 more didn’t, but those 5 saved consistently? You can’t possibly make the same observation the teller has if that’s the case.

  98. There has — and always will be — what you call a “generation gap” in savings.

    Young people (ages 18-35) are in their borrowing years. They are what financial marketers label “Credit Driven.” They are getting credit cards, buying cars, first homes, getting married, having babies, etc. All that stuff demands more cash than they have.

    Middle-aged people (35-55) don’t need to borrow, but they also tend to have few investable assets.

    Seniors (55+) have accumulated some wealth.

    I have a crude graph illustrating this “Financial Lifecycle” here:

  99. Surprised no one has mentioned health care costs!

    Even with our $22,000 a year employer paid health insurance plan, we spend more on health care than a generation ago. My MIL fondly remembers spending two weeks in the hospital following the birth of each of her 7 children. A two week hospital stay today could easily bankrupt a young family, even with insurance.

    I was discussing the cost of braces for our children with my MIL and she offered to pay – remembering paying only $500 for braces for her several of her children (my spouse included). I declined her offer and told her the cost is close to $4000 for each child, including what dental ins covers – she was shocked! Her reply was something to the effect of how it would be impossible today to raise 7 children on 1 salary.

  100. 35 is middle aged?!? I know quite a few people who are just getting married or having their first kids at that age! I guess that’s another difference between us and previous generations.

    I think that measure is a little outdated. With more people in their twenties struggling to make ends meet (or living at home!) I think the “credit driven” age is going to last a lot longer!

  101. I think there are two generational things that you didn’t hit (and were already mentioned by comment 12).

    First, I do 99% of my banking online. The teller at my local bank might think I’m not a saver, but only if they don’t pay close attention and see regular to-from transfers from my online account.

    Second, I also do not know or keep track of the balance on my checking. I don’t keep my account “at the edge” and have few transaction (everything is spent on the credit card, paid monthly in full). So if the (online — i never have called) balance says $500, I know what that really means, and I’m not going to waste my time keeping a ledger.

  102. Pay is relatively lower for young people than it was for the WW II generation. To earn a decent salary, you have to start with at least a bachelor’s degree, something that has become an expensive proposition. My father earned a good salary as a master mariner, and he didn’t even have a high-school diploma.

    Costs, on the other hand, are relatively higher: the costs of housing and automobiles are outrageous. In most parts of the country you can’t do without a car. My parents paid nothing like what we have to pay to keep a roof over our heads, and when they were young most towns and cities had adequate public transportation. Even Los Angeles had a local train system. And when my father bought cars, he could pay for them in cash.

    Nor was health care obscenely expensive. Doctors couldn’t do much for you, but on the other hand, you didn’t have to subscribe to insurance plans that pick your pocket, either.

    Conditions have changed so radically, I fail to see how you can make a comparison. It is very hard to understand how a young person saddled with student loans, automobile payments, and mortgage or rental debt plus a breathtakingly expensive health care plan could save much.

  103. @ Emily,

    I don’t think that people are necessarily saying, “I save and therefore any generalities about people in my age group that contradict my personal experiences are wrong.”

    It’s more that the specious reasoning in this post is presented as a legitimate way to assess how much someone is saving. The balance of a checking account at a brick-and-mortar bank is not an accurate means of judging savings!

    What’s worse is that this is being presented as “people in Generation Y don’t save” rather than the probable reason: young people earn less and have had less time to accumulate money, and if they do accumulate money, it’s in an online bank earning more than 0.0125% interest.

  104. I agree with many factors mentioned in the posts above. I keep thinking, however, of the relative costs of buying a home in my parents’ generation (I’m 35) vs. mine. I recall hearing somewhere that while the relative cost of food, energy, etc. has come down maybe 25% since the 60’s/70’s, the relative cost of housing has increased 75% (sorry, I don’t have the citation. Heard it on NPR at one point, and I think my stats are close).

    Now, I often wonder about this statistic b/c the friends I know with new homes have large, new homes with granite countertops, jacuzzi tubs, etc. while my husband and I bought a more modest 50’s ranch home without all the updates, for about half the cost. So I can see why it’s harder for the younger generation to save, since their ‘big ticket’ costs like housing are higher… but shouldn’t we take some responsibility for buying into the ‘need’ for a McMansion? If people weren’t buying them, builders might build something more affordable, which certainly makes saving some of your income easier.

  105. I would have to go as far as saying that I thinking it’s the banking system that’s old fashion. Younger people today don’t go into banks. They might not even use a physical bank. Nowadays with online banking and brokerage accounts do you really need a bank? I might even go as far as wondering if the current banking situation and changes are not pushing more and more people away from the conventional banking system. Young people might actually realize that they have a long time and that savings account and CD returns just aren’t competitive.

  106. Like many commenters I have several hundred K in ING direct. Just read a news piece on how the ING parent company is looking to divest the US online banking unit.

    Does anyone have any concerns with this? I’m over the FDIC limit and need to look at spreading this out, tracked ING’s balance sheet- saw it was pretty strong so haven’t taken action yet.


  107. “Our North American culture evolved into a consumer based culture well over one hundred years ago. … Toys may have been simpler and electronic gadgets non-existant, but that doesn’t mean people didn’t want things.”
    True — but a big difference is that now people can GET these things even if they don’t have the money. Credit cards, or even “zero interest for one year!” (a far cry from layaway), can make it possible to rack up huge consumer debt, or numerous small overdraft fees.
    I’m gonna sound like a dinosaur, but here goes: Sure, I wanted things like nice clothes and the latest music when I was a young woman. Generally I couldn’t get them because they cost too much and I had very little money. My sister and I would put a shirt or pair of slacks on layaway and it would take weeks to pay it off. Contrast that to my daughter, who at 18 walked onto a college campus and got a credit card which, thank heaven, she used responsibly. (J.D.: She did not get a Frisbee.)
    Note: I am *not* saying that every young person is a lazy, greedy so-and-so. What I *am* saying is that credit makes our consumer culture so much more OBTAINABLE by people who in the past would simply have looked at a big TV and sighed. Now a lot of people can get those TVs. But at what price, ultimately?
    Full disclosure: I have a credit card. I use it. I also pay it off at the end of each month. And yep, I save.

  108. Mike 114 —

    Thanks for the heads-up. They way I read it ING banking is fine, insurance will get sold, EU parts first, next year or later, plenty of time to flee if you think so, but to where…? We are big fans of ING.

    Of course you know, FDIC $250k was extended to 2013, and by adding account in joint names you are covered up to $500k.

    If you’re over that, um, congrats, and please advise us where else you’re thinking of going.

    (At our age we’re out of stocks now, still hold some residental rentals, half-heartedly looking to buy more because there are some bargains and because it is a reliable inflation-hedge. But a bad tenant can be a lotta work….)

    Have a profitable day!

  109. From a link some other poster put

    “As a saving group, Generation X skews higher than the national percentage, stashing 16.2 percent of their income, with a high percentage invested in mutual funds.*”

    I guess this statistic (if true) totally refutes the “folksy” wisdom of the wise bank-teller, JD. Please address.

  110. I believe there has been a big shift in the past 15 years towards a more consumer oriented society on the one side, combined with higher prices (at least in Europe) and the struggle for companies staying competitive in their markets.

    I fully agree with the post, that it is necessary to somehow make one’s finances visible. I am using Microsoft Money now for almost a year, and it has already helped me in identifying where my money goes. Something similair could have well benefited the lady, who went to the groceries four times on one single day.

  111. There are some great point here. I think it is so critical for people to know how much money they have in the bank account. It is just silly to spend money that you are not sure whether or not you have it. Keeping track of your money will also lower the chance of errors.

    I don’t know if there is really a generational gap in saving. I think many people tend to save later in life and spend more when they are younger. When in your youth, retirement and having money when you are older are not really on your mind. Of course, there are the exceptions to every rule, and there are quite of few younger people who save a lot starting at a young age.

  112. I think it’s true that MOST young people today don’t save a lot of money, and I certainly have lots of friends who fit that stereotype, but I think it’s pretty unfair to say that no one does. I was born in 1982, and I’ve had at least one job (with one three-month break to start college) since I was 16. I bought a condo my senior year in college with 10% down because I had enough money left over after paying my way through college, and my husband and I still save a huge percentage of our income. (However, that money all goes into a Roth IRA, 401k equivalent, or ING; we only keep about $500 in our brick-and-mortar checking account, so I’m sure that the teller there would think that we weren’t good savers if he looked at our accounts.)

  113. Since there is no way to discuss this topic without a ton of generalization, mine is that depression era people (i.e. my grandparents) had little money but were big savers. Baby boomers (i.e. my parents) often earned and so saved lots of money but are even bigger spenders. My generation, with neither the benefit of of being raised by frugal parents nor having access to the same economic opportunities that our parents had (huge growth in economy and stockmarket during earning years, pensions, inheritances, healthy social security) are doing the best they can.

  114. Apparantly the generation gap is to do with the WWII rationing and lack of resources. People knew to work hard and make things go a long way. I am 22, and my generation does seem to (generally) care a whole lot less about saving. Myself and one other friend managed to graduate from university debt-free (we both lived at home so could save money on accomodation, however). All my other friends have $30,000 debts (or more) and most of them are not great at saving. I don’t how they will pay it back or buy a house one day.