Is Saving for Old People?

A post on a “savings generation gap” at Get Rich Slowly the other day caught my eye. In it, J.D. argued that there’s a “generation gap” between spenders and savers. People who are over some particular age threshold – somewhere around 35 or 40 – tend to save their money, whereas people who are younger than that tend to spend their money.

I agree with J.D.’s general conclusion that there is some sort of gap between spenders and savers, but I think the age thing is merely incidental. In my eyes, the real difference between spenders and savers is that the savers realize that they have something to lose.

In my own life, I was a big spender during my early professional years. I lived in an apartment with my wife and, in essence, had very little to be responsible for outside of my job and my marriage. I worked hard at both of those, but in terms of worrying about taking care of the future, there really wasn’t much to take care of. I didn’t have a house. I didn’t have dependents. I wasn’t established in the community yet – most of my friends were holdovers from college who were similarly unanchored. I had lots of free time.

Roll the clock forward several years. At that point, we’re living in a house. We have two children. I’m involved in several community projects and serve on multiple boards. We have lots of friends and acquaintances in our town, too.

Before, I didn’t really have too much that I could lose. If I spent all my money, there really wasn’t any risk involved with it. As long as I kept up with my career, I could live through my money mistakes. I felt very free to spend with reckless abandon because there was little real-world consequence to spending in that way.

Today, if I spent like that, there would be serious consequences. Would we be able to keep our home? Would we have to leave the community we’ve worked hard to establish ourselves in? What about our children? Am I doing what I can to take care of them? As I write this, I’m sitting in a home that’s a huge six-figure investment of our money – I need to make sure it’s not falling apart, either. The income from my writing career is notoriously unstable, too.

I save because I now have things in my life that I need to protect. That wasn’t true earlier in my life.

I think the idea that “saving is for old people” comes from the journey that people take in life. Early on, we have fewer elements in our life that we need to protect. We don’t have a home. We often don’t have a marriage. We often don’t have children. We often don’t have an established role in the community. We often don’t have an established career.

Later on, many people do establish these things. They begin to realize that they can indeed lose their life’s work. They want to protect all the work that they’ve done. So they begin to save. Often, this is coupled with other shifts in life perspective as well.

In that context, there is something of a correlation between age and saving tendencies, because older people have more to protect and are more aware that it needs to be protected. Older people have the fruits of many years of labor, something that younger people simply have not had the time to bring to harvest yet.

Of course, looking back on my journey, I regret not saving during my early years. Most of the things I spent money on then have left me with nothing at all now except for a worse position in life. Spending so freely for so long directly means more worries today – a result that I could have easily prevented by looking with even the slightest critical eye at my purchasing choices.

Did I need to learn that lesson? I don’t know. I think that some people need to learn it. I think that others have it ingrained in them from an early age.

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12 thoughts on “Is Saving for Old People?

  1. craig says:

    I sat down with Quicken when I was 24 years old and started playing with the investment calculator. It was the first time the idea of compound interest was made concrete. When I saw the massive, massive difference in money at retirement that I got through starting early, I was inspired to start investing right then.

    It’s now 16 years later and BOY am I glad I did that. I’ll be able to retire at 50 or 55 with a sizable investment portfolio, paid off house, and yearly travel (we’re starting some modest trips overseas now, in fact with the idea that it’s better to travel when you’re still healthy).

    To anyone who is putting off saving until later, QUIT IT. STart now, and your future self will thank you.

  2. With all of these things that you are protecting, do you feel that you are being too guarded? Money is about finding balance between saving for tomorrow and being able to enjoy it today. How much do you budget yourself for fun in a week or month’s time?

    Are you investing too much emotional energy in worrying, protecting & guarding that when in 10 years from now you will look back and regret the choices you made in life just like you look back today and regret the choices you made in your 20′s?

  3. George says:

    Oh, come on, Trent. Older people fail to save, too.

    The real lesson is that older people with MONEY started saving when they were young, not when they aged!

  4. Daniel says:

    I’m 22 and you’re absolutely right about having few responsibilities. I am able to save over 50% of my take-home pay. But I could very easily spend more and still not have a problem. And once I got in the habit of spending…I’m sure there would be months when I would overspend instead of saving.

  5. Amateur says:

    Saving is also harder in the earlier years, with student loans, thoughts about graduate school, car payments, and some of that money going into fun things. Things cost more now than they did in the past and salaries have not increased to match it. The older generation didn’t have to look at food prices and compare organic versus not and decide whether or not paying extra for organic made sense.

    Younger folks do go out often with friends or on dates while movies cost $12.50 now. There won’t be much marriage in the future without dating first, which is today, dates can cost $50 easily. Yes, I’m sure there are cheaper avenues for dating but for first dates with someone, even something small like a movie can cost a lot.

  6. RDS says:

    Well said, Trent. It can be easy to turn anecdotal evidence like this into a story about the failings of the current young generation. I am a big believer that people are just people. The idea that life was once easy and everyone made better decisions strikes me as a convenient fairy tale.

    As Annie Dillard so eloquently put it in her wonderful book, For the Time Being:
    “There were no formerly heroic times and there was no formerly pure generation. There is no one here but us chickens, and so it has always been: a people busy and powerful, knowledgeable, ambivalent, important, fearful, and self-aware; a people who scheme, promote, deceive, and conquer; who pray for their loved ones, and long to flee misery and skip death. It is weakening and discoloring idea that rustic people knew God personally once upon a time – or even knew selflessness or courage or literature [or how to save money - come on, it kinda fits here] – but that it is too late for us. In fact, the absolute is available to everyone in every age. There was never a more holy age than ours, and never a less.”

    Dillard was speaking about people’s relationship with God, of course. However, I find it astounding in how many different arenas of thought her words ring true to me.

  7. Shevy says:

    I don’t think age is incidental. George has a good point. The older people with money are the ones who started saving earlier.

    But there’s another aspect to this. The real savers aren’t people over 40. They’re the people who are already senior citizens (and who may not be saving any longer). Many, many people who lived through the Depression found the experience changed them dramatically.

    They’re the ones who walked home from work to save the carfare. They’re the ones who spent $20/week feeding their families and grew a vegetable garden to add to it. They’re the ones who scrimped and saved to buy an 800 square foot single family home. They’re the ones who bought a car (one car for the whole family) and kept it for 15 or 20 years before trading it in. They had a party line because it was cheaper, even though it meant your neighbour might hear your phone conversation.

    They also weren’t the first ones in line when new things came out like TV, cable, satellite, computers, cell phones, etc. etc. That’s not to say that they didn’t eventually buy some of these things but they were way behind the curve because they felt saving and paying down the mortgage were more important than having the first colour TV on the block.

    Somewhere along the way we’ve lost that mentality and switched it to the entitlement mentality. “I deserve all those pretty, shiny things so I must go out and buy them.” The problem is, there are new pretty, shiny things every week. If you just chase them you’re obviously not going to be able to save.

    Were there spendthrifts back then and are there savers now? Of course, but the percentages have changed. That’s what the bank teller was telling JD!

  8. SP says:

    I think your story is true for a lot of people — when they are quite young and without children and homes, they don’t SEE the responsibility they have to their futures. That doesn’t mean it isn’t there, and that it wasn’t there for you. You just didn’t see it, or didn’t want to see it, until circumstances forced you to.

    I started saving as soon as I started making real money, because I had a natural inclination towards saving and was the type who spent a lot of time thinking about the future.

  9. Shevy says:

    @RDS
    “It can be easy to turn anecdotal evidence like this into a story about the failings of the current young generation. I am a big believer that people are just people. The idea that life was once easy and everyone made better decisions strikes me as a convenient fairy tale.”

    See, that’s not what I’m saying here. It isn’t that people who were adults in the 30s, 40s and 50s were somehow more pure or smarter than adults nowadays. They made the choices they did in large part because they were *scared*. Seeing what they or their parents lived through made them cautious, sometimes to a fault. In addition to saving money they also often saved vast quantities of plastic bags, pieces of string, empty margarine containers, etc. My own mother (who was born in the early 20s) complained bitterly in her last couple of years about the mountains of “perfectly good dishes” I threw out from her place. They were *margarine containers* from the late 1960s and early 1970s that we had used as cereal bowls and for food storage for 30 odd years! A senior living with one adult grandchild did not need 30 or 40 empty containers taking up an entire cupboard; half a dozen in the best shape were plenty.

    But this woman also kept her 1950 Ford until 1968 and her 1968 Chevelle until 1982. She kept a budget book and wrote down every expense. And she and my dad went from a little house to a bigger house and, after my dad passed away, my mother was able to buy her condo for cash!

    Being scared of the consequences resulted in a bunch of good financial decisions.

  10. Today most young people don’t seem to believe in the future. They can hardly believe the way things are in the present. Savings are zilch for the majority under 30 today.

  11. It’s because younger people have this idea that they need even the stuff they can’t afford to purchase now and so they do it on credit, and because people at 30-40 typically earn much more and already have bought most of the stuff they “need”. This explains it without anyone developing a concern to insure/protect the liabilities they have generated.

    The reason I started saving was that I realized that savings could be invested and used to make money much easier than going to work every day. I started when I was 25. If I had realized it earlier, I would have started earlier. If I had realized it later, I’d probably still be working all day long.

  12. John (10)- you may be on to something writing that “young people don’t seem to believe in the future”, but it may go farther than that.

    I don’t think they can conceive of a future, of being older, or less capable. It may be more about a lack of perspective than of belief. We were all there at one time.

    The other side of this too is that a lack of belief in the future feeds the natural hedonism of youth. It’s helped along by the advertising culture that knows how to play into it–ever notice how most advertising is aimed at the youth market–it’s no accident!

    The growth of credit in the past few decades has played into this as well. It isn’t a moral breakdown of youth, but a confluence of events working on them. And as one of the commentors above notes, it isn’t all young people who aren’t saving these days. The national statistics on saving are quite dismal. At least the young will have time to adjust and prepare.

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