Fifty years ago, American life was much different than it is now. In 1968, women were just starting to enter the workforce, though, for the most part, families lived off of one income—the husband's. Now, many families live off two incomes, but even with the extra income, they struggle to make ends meet and are often in debt, sometimes extensive debt.
What has changed? Is it harder now to save money than it was 50 years ago?
Some Things Are More Expensive
To be sure, some things are more expensive. Health insurance and healthcare, in particular, is much more expensive than it was 50 years ago. In part, this is because of medical advances, but it’s also because of the for-profit nature of insurance companies.
In addition, retirement is another aspect that has changed. Fifty years ago, many people worked for one company during their lifetimes, and the company would give them a nice pension when they retired. Between the pension and social security, a person could have a secure retirement. Employer pensions are mostly gone now. People need to save for their own retirement, and that is a challenge.
Finally, college tuition is now much higher than it was in the 1960s when adjusted for inflation. Plus, more people are attending college than they did in the 1960s.
We’ve Changed, and That’s Why Saving Is Harder
While it’s true that health insurance costs more, and we’re now more responsible for our own retirements, and that college tuition is much more expensive, those three factors alone don’t explain Americans’ current low savings rate and high debt rate. In 1968, the average savings rate of disposable income was 11.7%, while in 2017, it was only 3.7% (FRED Economic Data). In 1968, excluding mortgages, Americans had no revolving debt, and approximately $5,500 in non-revolving debt (adjusted for inflation to 2010 dollars); in 2010, Americans had approximately $3,900 in revolving debt and $10,168 in total debt, not including mortgage debt (The Atlantic).
Thanks to changing societal norms and expectations, we’re saving less and going further in debt. There are many reasons why, and most of them don’t have to do with items costing more than they did in 1968 (adjusted for inflation).
Cultural Norms
Simply put, our cultural norms have changed. We expect more, and we pamper ourselves more. Fifty years ago, there weren’t designer clothes for kids, let alone many stores selling these clothes. People had far fewer clothes than they have now. Just recently, I saw a family friend listing her three-year old’s used clothes to sell on a local Facebook group. Her daughter had 14 pairs of shoes and 10 fancy dresses that she’d outgrown, all in the same size. I’d venture to guess that 50 years ago, only the rich would be able to buy so many shoes and clothes for their kids in one size. Now, this is commonplace.
Debt Is No Longer Stigmatized
For most of the human experience, debt was stigmatized. If you had debt, you were looked down upon. Thomas Tusser said it perfectly when he said, “Who goeth a borrowing/Goeth a sorrowing.” Now, there is not that stigma. In fact, sometimes it seems that you’re stigmatized if you don’t have debt. You probably know many people who accept and promote the idea that it’s impossible to live today without a car loan or a mortgage. People just accept these as required for the type of lives we live now.
More Credit Available
Adding to the problem, credit is easier than ever to get. If you make your payments on time, even if you carry a sizeable balance, getting additional credit cards is fairly easy.
Years ago, when someone went to college, they worked and paid tuition as they went. Of course, thanks to inflation, that’s much harder to do now, but for years, colleges handed out thousands of dollars’ worth of student loans, which bogged down new graduates with hefty monthly payments.
I also find that mortgage companies are more generous with their mortgages than they should be. When we were in the housing market a few years ago, I was shocked at how much a bank was willing to loan us. I knew that there was no way we could make payments at the highest level. If I knew that as the consumer, why didn’t the bank realize that? What equation were they using to let them think that we could afford those kinds of payments? In the end, we chose a home that was 30% less than the upper range of the amount they were willing to finance.
Size of Houses
Speaking of houses, standards have changed a lot. I was born in the seventies, and I remember all of my friends having fairly modest homes. My friend who lived down the street was the youngest of five children, and they lived in a modest home with three bedrooms and one bathroom. That’s right—seven people living in a 3-bedroom, 1-bath house. How often does that happen now?
My aunt had a neighbor who had 10 kids who lived in a 3-bedroom house. (They also fixed up the basement to get more room.) Still, we never see these types of living situations anymore. Typically, each child gets their own bedroom and there is usually enough space for a spare bedroom or a den.
According to the U.S. Census, the median price of a home in 1968 was $23,500. Adjusted for inflation to 2010’s dollars, that would be $145,613. Yet, in 2010, the median price of a home was $218,200. That is a significant difference, especially when you consider how much interest you will pay if you make the minimum payments for 30 years. People now aren’t willing to put their families in the modest homes of 50 years ago, and that’s making it harder for us to save.
Two Cars (or More) Per Family Instead of One
How many families do you know with one car? For our first 15 years of marriage, we were a one car family. Sure it was a challenge, but not having a second car saved us a lot of money. Yet, how many families do you know who are one-car families? I didn’t know of any other families besides ours. Yet, look back 50 years ago, and there were many one car families.
Other Daily Life Expenses
There are many other changes to our daily life that are costing us hundreds of dollars a month:
Frequent Restaurant Meals
Now, the “average American household spends $3,008 a year eating out” (CNBC). Undoubtedly, American households ate out much less frequently in 1968 than they do now.
More Extravagant Celebrations
My parents were married in 1970, and they had a small reception in my mom’s parents’ backyard, and they took their honeymoon for less than a week a few hours north in their hometown state. While that seems so provincial now, my parents’ experience wasn’t unique. Many of their friends had equally simple weddings and honeymoons. Now, the average American wedding costs over $25,000, and the honeymoons frequently included travel to exotic destinations.
This same trend of extravagance is evident when it comes to kids’ birthday parties and holiday celebrations.
Home Entertainment
In 1968, there were about three channels on the television. Now, there are hundreds, and most households have cable, satellite, or a streaming service, sometimes several of these in conjunction. The costs for entertainment add up quickly.
Cell Phones
Cell phones didn’t exist in 1968, yet in 2015, “68% of Americans have smartphones” (Pew Research Center), and we’re paying $50 or more, sometimes nearly $200 a month for the privilege of having them.
More Vacations and Weekend Getaway
When I was young growing up in the seventies, my family went on one vacation. One! My entire childhood! Of course, this might be extreme, but when families did take vacations, they tended to travel locally and frugally by camping. Now, people take several vacations a year and travel further.
Conclusions
While saving money is a bit harder now when you consider the high cost of medical care, retirement, and college, the simple fact is that most Americans have trouble saving money because our standards have changed. You can still save money at an aggressive rate, matching the 11.7% people saved in 1968, but you have to be willing to forego some of the luxuries that many of us are accustomed to. Simply put, there are too many gadgets and comforts vying for our money.
