Being in my 30s, I'm one of those Gen X-ers older people look down their nose on for my flashy spending, addiction to bling and Starbucks lattes, and preference for credit card over savings account. I'm actually not a coffee drinker and I prefer planting flowers to purchasing flashy bling, but people my age and younger are becoming more like their elders than ever. It may have taken a Great Recession to wean us off the credit cards, but a USA Today/Gallup poll states that people in their 20s and 30s are scrimping and saving like those who lived through the Great Depression. And twentysomethings are more likely to be doing it than anyone else.
While only 32 percent of all Americans are saving more because of the recession, 44 percent of people ages 18 to 29 were cutting back. Another survey from the Conference Board about holiday spending found that while the average American was going to cut back on holiday spending by 11 percent, youngsters ages 25 to 34 are cutting their gift budget by 19 percent.
Now will the habit stick? Some economic pros doubt it. "If it's a prolonged recession, I think it will stick. If it's a year or two, probably not," says Aaron Patzer, CEO of Mint.com, which is a financial-help website used mostly by 20- and 30-somethings. Comerica chief economist Dana Johnson also doubts a permanent change because "we don't have a very good track record...for saving a lot of our income." Thanks for the votes of confidence, guys.
Meanwhile economist Mark Zandi predicts the savings rate will rise from the current 1.3 percent to 3 percent next year, and hit 8 percent in the next decade. That's a far cry from Japan's saving rate of 25 percent and China's whopping 50 percent but hey, it's also a far cry from our former negative savings rate.
I agree with Zandi . He says this is the financial version of 9/11, and while I've lived through a couple of recessions already, I know the difference between those and this one. For 20-somethings in their first job, this is the only one I've experienced. When you see Wall Street institutions crumbling right and left, and your Boomer parents are freaking out about what they're going to live on for retirement, it's going to make a lifelong impression.
I was surfing cable over Thanksgiving with my 20-year-old cousin when the Hilary and Haylie Duff straight-to-video movie Material Girls from 2006 came on the screen. As heiresses to a cosmetics fortune, the two were traipsing around the office in wedges, carrying Fendi baguettes with arms covered in bangles. "Ooh, look at all that bling!" My cousin's nose wrinkled as she turned to look at me. "Can you believe we ever acted like that? It seems so long ago." Out of the mouths of Millennials.
It took a recession for Gen X and Y to start saving. Now will it stick?