'Generation Debt' is Going Deep into the Red

Here's a piece from MSNBC on how 20 and 30-year-olds are going deep into debt. A summary of the situation:

Many twenty- and thirtysomethings raised on MTV and InStyle magazine have tried to mimic the glamorous lives of the rich and famous through the use of credit cards. But as the 21st century has ushered in skyrocketing housing prices, stagnant income levels and five- or six-figure student loans to pay off — a seismic shift has occurred: A growing number of young adults are reassessing their lifestyles and mimicking the frugal habits of their Depression-era grandparents. They clip coupons, organize grocery-shopping trips to Sam's Club instead of darting to Whole Foods and now consider a $4 cappuccino as an infrequent luxury.

The piece goes on to lament this trend.

What? You mean you can't spend like wild all of your life -- you actually have to spend less than you earn? The tragedy of it all!!!!

What's going on here? Do these young people really think that they can spend like crazies and not eventually have to pay for it? And why does it seem like a disgrace to cut coupons or visit Sam's? Where did this attitude come from? My thoughts on possibilities:

• Lack of training from parents/educational system on proper handling of finances
• Advertising/TV shows that encourage the thought of "you deserve the best" and that "the best" is always expensive
• Loose credit policies and slick marketing from credit card companies
• Simply selfishness/attitude that this generation has grown up with
• It's really not this way -- MSNBC is just trying to hype a situation that doesn't exist

I'd like to hear what you think. Any of these right? If so, which ones? If not, what is?

Comments

[Mike]

This is a great post. I am 25 years old, and everyday I watch my friends live way above their means. The simplest of tasks such as, "living on less than you make" is not understood in my generation. Please feel free to read my blog that I just started up for fun. I am going to be writing on the same topics. Thank you.

http://fanellifinance.blogspot.com/

[Kim]

I think all but the last one are accurate. I am 31 and can say that I never really had much of a financial education in my life. Fortunately I never went hog-wild and never had student loans so my debt isn't enormous, but I would say I am more the exception than the norm.

[mapgirl]

Hi FMF!

I would have to say the blame is on the individual. When I was in college in the early 90's, there was plenty of loan information about interest rates, repayment schedules, present value of money, etc. If a halfway responsible person reads it, they'll start understanding what they are doing by undertaking student loan debt, or those enticing credit card offers on campus.

It's the sheer apathy over their finances that gets kids into this mess. I have at least 2 very smart friends who are disasters at personal finance. They don't drive cars and pretty much ruined their credit at 19. They never really bothered to think before they spent.

The loosening of credit definitely contributes, but I would like folks to stop blaming 'the system' and realize that there is useful and helpful information out there, often for free if they just look for it. Any financial aid office on campus has it. Pretty much any bank too.

My parents didn't talk to me about money and credit. They just told me to save money without much more advice. Most of what I know I learned from books my older sister gave me when I graduated from college, or reading the news, websites and the fine print on my student loans and associated materials.

Just my opinionated 2 cents.

[Sarah Leon]

Primarily I think the causes of this kind of stupidity about debt are the:
-- "I deserve it" mentality
-- Instant gratification drive
-- And total lack of financial education. (I don't know anyone whose parents taught them about money.)

I'm really concerned about what trends like these will eventually do to marriages overall. Conflict over finances is the #1 source of arguments in marriage and a leading cause of divorce. Overloading on debt will obviously put marriages under huge stress. And who pays ultimately? The kids...

[mark]

There's a crucial bit that is missing here. What do young people do better than anyone else? Rationalize loss. When you're 23, just out of college, and working your first real gig, you've got nowhere to go but up. So people, myself included, buy beyond their income knowing or hoping that they will one day have the money to pay for the goods/vacations/etc that they are entitled too.
Just because you're 24 and making 30k a year doesn't mean you don't work hard. You deserve the things you want. But reconciling your desires with your means is way too humbling....

[Michael]

I'm in that age range, but without the debt, of course. I've got plenty of friends in the situations described in the article, and I have to say that most of them got there through a combination of lack of education and poor self-control.

[Dale]

There will be profligate spenders in every generation as well as savers and investors. I watched my peers choose their financial paths in life. Now I'm watching a younger generation following on our heels doing the same. I offer as ample evidence that this is nothing new the words of Polonius as written over 400 years ago by William Shakespeare:

Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Those who would spend money chasing what they believe is the lifestyle of their friends and coworkers would do well to heed the lines that follow those:

This above all: to thine ownself be true,
And it must follow, as the night the day,
Thou canst not then be false to any man.