The following post is by MPFJ staff writer, Melissa Batai. Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food. She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.
When I went to college, I was the first in my family to do so. I earned a scholarship to our local community college, and did not have to pay any of my tuition or fees. I transferred to a large state university, and the first semester I was there, I received a generous financial aid package funded mostly by grants.
However, the next year I was at the university, there was a change in presidents (and policy). While I still received financial aid, it was for student loans, not grants. I left college with $20,000 in student loan debt.
When I went to graduate school, I received a stipend, but I still had to take out some student loans for my living expenses. I had $10,000 in student loans from grad school, leaving me with a total of $24,000 in student loans. (I had paid off some of my student loan debt after my undergraduate degree when I worked full time for 18 months before graduate school.)
I just paid those loans off a few years ago!
Because of my experience, I am determined that my children will attend college without student loans or with a minimal amount (less than $10,000). I don’t want student loans to impede my children’s future as they did mine. (I just became a home owner last year!)
Many Gen Xers (my generation), were the first in their family to attend college. Our parents had no experience with the college process or the enormous costs of college. But now that many of us have been through the experience, we’re better able to guide our children.
Our children will reap the benefits of our experiences with student loans. In fact, some children (and parents) are deciding that college is not worth the expense. Others are deciding that it doesn’t make sense to go away to an expensive school but rather that it’s more cost-effective to attend the local college or university. Students are now choosing majors more wisely.
This change is in large part due to the backlash from my generation being saddled with student loan debt.
Millenials are approaching college differently than Gen Xers.
Millenials, just like every generation, have been financially affected by the previous generation.
Life is indeed cyclical, and we see that clearly when looking at each generation financially.
The Boomers React to Parents Who Grew Up During the Depression
My grandparents were married in 1934, during The Great Depression. They had nine children and were extremely frugal. I routinely saw my grandmother wash used pieces of tin foil and plastic baggies. She never wasted anything, and she repurposed many items. She had a few, loved possessions. She definitely didn’t have clutter.
Children of those who grew up and were in young adulthood during The Great Depression, the Baby Boomer generation (born between 1945 and 1966), knew the value of saving from their parents. However, perhaps because of the tight financial reins of their parents and because they grew up in a time when the economy was booming, the Boomer generation often suffers financially. David Rodriguez, a Financial Education Advocate with Generations Federal Credit Union argues, “[Baby boomers] knew better. They spent their money and didn’t save, but they knew the concept of saving based on their parents and elders who lived through the Great Depression” (Go Banking Rates).
Of my grandparents’ children, about a third are frugal and very responsible financially. Another third worked hard to earn a good income so they could spend freely. The remaining children have struggled financially with debt, overspending, and bankruptcy.
Even though your parents may teach you how to handle money, either explicitly or through example based on their own experience, you still ultimately decide how to handle your own money, as my grandparents’ children demonstrate.
Gen X Generation Carries Debt
Many Baby Boomers were free spenders, and their children learned from this example. Gen X (born between 1967 and 1982) was the first generation to have easy access to both credit cards and student loans, and many of them fell into debt quickly. According to Financial Advisor Magazine, “Gen Xers are debt-laden. Almost 45% say they have too much debt to even think about saving or investing, and 35% think they will be in debt for the rest of their lives.”
I am one of those debt-laden Gen Xers. However, in the last few years, my husband and I have paid off half of our debt. (We now only have student loan debt for my husband left, not including our home loan). We’re living on a very strict budget, and we refuse to acquire any new debt. Within the next 5 years, our finances should be MUCH better, assuming we stay on our current path.
I am able to do this in part by remembering my grandma’s example of frugality and also learning from my aunts and uncles who are also frugal like my grandmother.
The cyclical nature of life continues. For those who grew up during the Great Depression, the pendulum swung to extreme thrift out of necessity and then habit. Baby Boomers and Gen Xers swung the other way thanks to secure jobs and a good economy for Boomers and easy access to credit for Gen Xers. Now the pendulum is beginning to swing back to thrift.
The Millennial Generation
The Millennials, sometimes called Gen Y (born in 1983 to 1994), grew up seeing their parents spend freely and acquire hefty quantities of debt. However, The Millennials suffered from the recent recession and have likely found it hard to secure a full-time job let alone one that pays well. Many of them choose to freelance, but then they have the large expenses of self-employment taxes and medical insurance.
This generation is more likely to be financially conservative. “Despite these difficult financial circumstances, and perhaps because of them, studies find Millennials are the best at saving money of all generations. Rodriguez explains, ‘I think Millennials will be the best savers, because they have witnessed firsthand not only the recession, but also their own parents struggling to save for and pay for retirement’” (Go Banking Rates).
Influenced by Circumstances
Each generation has learned a financial lesson from a previous generation. A look back over the last 85 years shows a routine pendulum shift—thrift for those who lived through the Great Depression, free spending for Baby Boomers and Gen Xers, and now a shift to thrift again with the Millennials.
True, we learn from each previous generation, but we’re also influenced by world circumstances.
The Baby Boomers benefited from a booming economy and employer pensions.
Gen Xers likely lived through the recession of the 1980s and saw a decline in employer pensions. Gen Xers became the first generation to have the heavy burden of saving for retirement almost entirely themselves.
Millennials have been influenced by our most recent recession and may have trouble finding and keeping a good paying job. Because money is scarce, they’re frugal and finding new ways to enjoy their lives like seeking experiences rather than the American Dream of owning a house.
How about you all? How have you been influenced financially by the generation before you and world circumstances? Do you think you’ve learned valuable financial lessons from your parents, or do you try to handling your money opposite of the way your parents handled money?
Share your experiences by commenting below!
***Photo courtesy https://www.flickr.com/photos/edanley/4289324169
