Updated on 03.28.07

What The 1960s Taught Our Parents About Money – And Why We Should Filter Their Financial Advice

Trent Hamm

To set the mood:

The 1960s were the decade in which my parents grew up. Their parents were the so-called Greatest Generation and I, for one, actually think that moniker is appropriate, considering that their childhood was the Great Depression and their early adulthood was fighting World War II, a set of experiences almost beyond my grasp. My parents (and with some good probability, yours) grew up in the era of the rise of the military-industrial complex, in which people could reasonably expect to get a solid paying job and stay there throughout their lives.

This meant several things:

One, American education was the envy of the world. You simply couldn’t get a better education than the one provided by an American institution. Colleges were yet to be overcrowded as even then only a small minority went to college, so if you were to get post-secondary education in the United States, you were set.

Two, real worker compensation was never higher. In terms of the actual value of a dollar at the time, the average American worker had it made in the 1960s and 1970s. No matter what you did in life, you could fall back on a factory job that would pay you a strong enough wage that you could make it, no matter what.

Three, although the Soviet menace was real, it was distant. Although the Cold War was terrifying in its own way, it never ascended into a fighting war and there was never any sort of direct attack on American soil. The Vietnam War was ongoing, but it was literally on the other side of the globe, abstracting in a way the bitter horrors of war and death.

Four, the art of marketing and consumerism was in a nascent stage. Look at the sophistication of advertising in the 1960s and compare it to now. There were some baby steps, clearly, but the psychological edge of today’s marketing utterly blows away what you would find in those days.

Five, the price of homes in real dollars was extremely low compared to today. The price of a home since 1960 has gone up at a rate much faster than inflation, a bull run that is perhaps finally being slowed or reversed after many years of incredible growth. Thus, someone who bought a home in 1960 stumbled into a killer investment.

Six, employers took long-term care of their employees. If a person worked in a factory for thirty years, the company would guarantee them a pension that would safely enable them to live out the end of their days in a comfortable fashion. If you took care of the company, it took care of you.

Under these assumptions, my parents could buy a home (rather cheap) when they were younger than I am right now merely on the wages earned with just one of them working a seasonal factory job (which paid quite well). Because of this factory job, they now receive a very nice pension after having never put anything into their own retirement plan.

Does this sound like your economic reality? It certainly sounds nothing like mine. My reality is more like this:

It involves employment that treats me more as an independent contractor instead of a real team member, which means I have to save for my own retirement rather than plan on a pension.

It involves homes that are amazingly expensive, even in the relatively cheap area where I live.

It involves no “fall back” plan in the form of abundant factory work that anyone can do. The fall-back jobs that I know of make minimum wage, which is far less than a true living wage in the United States.

My parents regularly offer “advice” on how I should manage my finances based on these assumptions that their childhoods and early adult lives showed them, pointers such as you should buy a house as soon as you’re married and you’re young – you should be buying fun stuff – go ahead and get that monster plasma television. Their hearts are undoubtedly in the right place, and they are speaking things they believe to be true, but they aren’t true for me – if I took their advice, I would be in the poor house.

So what’s my solution? If you are given advice by your parents – or by anyone at all (including me) – consider the assumptions they’re coming from. Are they valid for you? Even if they are, ask yourself does this advice really make sense for me? Don’t just blindly follow any advice.

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  1. Great perspective Trent … Its all to easy to base opinions and advice on historic references, vs current reality.

  2. js says:

    I’m 31 and my dad’s “greatest generation” assumptions are pretty darn funny. “Don’t ever put your money in the stock market”. LOL.

  3. Clever Dude says:

    I think I’ll have to send this to my own parents…and grandmother. Thanks.

  4. Benji says:

    I have to say that I disagree with a lot of your observations and I’m shocked because you seem to be an informed person.

    1.)A US education is still very valuable and desired by those abroad. Colleges are overcrowded because of the abundance of student loans and easy money in it for universities.

    There have been recent studies that show nearly 25% of US college students drop out after the first year and the graduation rate is only 50%. Yet financial aid and access has increased. The rate is even higher among community colleges and vocational programs which also allow access to government backed student loans.

    2.)What does real worker compensation have to do with someone’s ability to obtain a factory job? Have you ever worked in a factory? Are you aware of the technological leaps that have been made in manufacturing and logistics since the 70’s? There are still plenty of mind-numbing, on-your-feet-all-day, jobs that pay quite well. Unfortunately, those positions are all being filled by people that are willing to sweat to make that money – but we have to import them.

    3.) The Soviet Union was real and close. Along with cheering socialists on our own shores they were successful in bringing itself to our doorstep.

    4.) Is today’s marketing harder to resist? I am completely confused about this.

    5.) Again, you completely ignore why home prices have risen. Government backed home loans, building codes, materials improvement, technological advances, increase in square footage, etc… Have you ever lived in a home built in the 50’s? No a/c’s or walk-in closets in those bad boys.

    6.) Again, I can understand why you may have had financial difficulties in the past. You aren’t asking for compensation your asking that someone be there to help you.

    I may as well be reading Chomsky. If you are working for someone that treats you like a contractor it is probably more than likely that you chose salary over total compensation when seeking employment.

    I grew up in a family of fisherman. Seasonal work and heavily dependent on government to take care of them. They made pretty good money and saw no need to save it because AFDC was always there when it ran out.

    It was the boomer generation that taught us we could be smarter through chemical abuse, that our country was evil so working against it was admirable, and that results don’t matter only intentions, so that even if the illegitimate birth rate today is at 70% and obesity is the largest health concern among the poor they still ask why hasn’t someone else done something about it.

    Sorry for the sloppiness but I’ve had to type this up with an 8 month old in my lap.

  5. Anne says:

    Wow, your parents grew up in the 60s?? My siblings were born in the 1960s and I’m only 24. ;)

    Anyhow, good post.

  6. Stephanie says:

    On the other end of that, Anne, my parents DID grow up in the 60s, and I’m only 20 years old! (I’m the baby of the family, can you tell?)

    I’ll have to ask my mom what she thinks about this post.

  7. Ed says:

    What you didn’t touch on was the rise of the Woman of the household having to go to work in the same time period. Due to the rise in costs and the availability of so many choices the family had to put two workers into the job market.

    The unions were instrumental in organizing the retirement pension and the 40 hour work week. Yes, you could go to work for one employer for your whole life. What is the status of unions today?

    I remember the fifty’s and sixty’s very well I have to say the addition of the television set into the home was most probably the most unsettling factor creating discontent with ones surroundings. Good or Bad or a combination of both it has changed the way we perceive things.

    In any case the root for attitude you talk about was only a period of less than 10 years, amazing how long it has stuck in peoples minds isn’t it?

    Say Stephanie, ask your mother if she would want to go back to that era or not and why or why not.

  8. rhbee says:

    Yes, I would go back for a couple of reasons. One, it was a time of discovery, a time when I still believed in John Kennedy, when the Smother’s Brothers made me laugh, when That Was The Week That Was let me see what government, any government might really be about, and when I learned that everything that my parents believed in wasn’t really perfect. And two, it was when I worked three jobs in order to put myself through college, when I first tried pot, when I learned that I (and my friends) could stop a war if we just believed in ourselves enough to peacefully protest it, and when I learned that less is more if you’ll just let it be.

  9. plonkee says:

    I feel that Benji missed the general point that I took, which was that life is different now, so our financial attitudes needs to be different. It could be claimed that the boomer generation have messed everything up, but that is independent of the fact that things are not the same as they were then.

    For example, employer’s treat us like contractors in the sense that they are not concerned about us outside of our employment for them. They do not feel that they need to provide us with pensions or give us jobs for life. This gives us opportunities that our parents didn’t have, but also means that some strategies that worked for them will not work for us.

    It didn’t read to me that trent is asking that employers start to act like this (again), simply that it would be foolish to behave as if they will help us, when they clearly won’t.

    Fear that the Soviets might bomb us with a nuclear weapon (from the 1960s and 1970s), is probably different to the fear that the bag on the bus next to you contains a bomb (Britain since the 1970s). I suggest that this is the case because, from what I have heard, mainland Britains were genuinely more afraid of the IRA than the Soviets. I’m still not sure how this affects the changes in personal finance strategies though.

  10. Dagny says:

    I guess I’m your mom’s age :-)
    The war in Vietnam touched us who grew up then quite a bit as there was a draft, not a volunteer military. My ex was drafted and spent almost a year in Vietnam. We all knew someone with a husband, brother, or cousin who was drafted. Many of us went to war protests.
    There’s an important historical event you did not mention. In 1971 President Nixon, aka “tricky dick”, withdrew from the Breton Woods monetary treaty. This removed the last link between the dollar and gold, thus setting the stage for an explosion in the amount of fiat currency loosed upon the world. This is inflation – this is why house prices are so high and this inflation also forced many women into full time employment outside the home.

  11. HustlinPete says:

    I think advertising is “harder” to resist in that it bombards the senses in ways that could not have been imagined in early TV. Ever watch any of the original Twilight Zone episodes? There’s one where Rod Serling is actually producing the episode for the companies buying ad time, explaining things in such basic terms compared to the advertising jargon that would be thrown around today. Advertising has followed other methods of information transmission in that it can now bombard our senses in new ways.

    I think the point is that things were “easier” for the worker, in that they were not “forced” into being a mercenary like we often are today. Economically it was a time when the standard of living greatly increased. Appliances became available, as did the jobs assembling them.

    What Trent is saying is correct, it is economically a very different world for us now than it was in the 60s.

  12. Bill says:

    Don’t let the last 5 years fool you.

    Over the long haul, real estate has been shown to return about 1% over inflation.

    Houses cost more now because of stricter codes, and because they have many more amenities compared to houses in the 1960s.

    Central air, decent insulation, etc. cost more.

    The house where I grew up in the 1980s had no A/C (only an attic fan) and relatively inefficient steam radiator heat with $300/month winter gas bills, all in an area of the South where today you’d run the A/C May-September.

    My 1995-era house has instant heat via an efficient gas furnace, cold central A/C, with average utility bills of $100/month.

    Not to mention much better interior trim, larger kitchen/bathroom with much better layouts, etc.

    And even the “starter” homes we choose to live in today are often double the size of those a generation ago.

    With a family of 4, I’m not willing to go back to the “typical” 1960s house of 1200 sqft, with 2-3 tiny bedrooms and often only 1 bath.

  13. Sharon says:

    I think that part of the differences in the generations is the amount of technology. What could you live on if you didn’t have a cell phone, one car, no computor, no internet, no DVDs, no VCR, no cable? Also, at least from a lot of books I read, many single adults in the 1930-1940’s lived in boarding houses because they were nicer and cheaper than an apartment. Now there are no boarding houses for “repectable young women”.
    I drove a young friend (in her 20’s) two hours into upstate NY and she was upset that my “minutes-only” cell phone wasn’t charged. She couldn’t feel safe with only one cell phone (hers) on such a long trip. Of course 15 years ago I drove from Michigan to Oregon with no cell phone. I called my family every day and didn’t do stupid things. I was fine. I’m not convinced it is more dangerous–only that everyone expects you to have a ton of stuff.

  14. Ruthie says:

    I think another thing that is sometime overlooked is consumer debt. Credit cards didn’t really become popular until the 1980s, which means that today’s generation often has large amounts of debt at high rates of interest that their parents likely didn’t have.

  15. cyndi says:

    I am Stephanie’s mom. Would I like to go back? No… it was a time when women didn’t have many of the choices we have now. It might have been a simpler time, but even today I struggle with my own mother’s concept that she has to rely on a man to take care of all her finances (my father died two years ago and my mom actually feels she has to ask her banker if she can go buy a dress).

    Vietnam was in our lives constantly .. we watched the news every night and I watched as people I knew died. Friends died, my friend’s brothers died .. it might have been 1/2 the globe away but it hit home hard. My ex-husband served there (before we met) and although he didn’t see a lot of combat, he still had the nightmares. The war today is a terrible threat but don’t try and diminish Vietnam, it was also, as was the war my father was in … each generation has had its battles.

    So I wouldn’t go back, not even for mom’s apple pie … well, my mom didn’t bake anyways!

  16. rhbee says:

    Actually, I do go back in the sense that I still maintain several of the freindships I started back then. And I definitely have kept the beliefs that I developed then. One thing that puzzles me these days is the current derogatory use of the word “hippy” to describe liberal democrats. Hippies chose not to be a part of the establishment, they dropped out, turned on, and were the better for it. The constant ad hominem rants of the political parties bears no real connection to those folks and does all of us a real disservice as it constantly distracts us from using what we learned then to better our world now. As a matter of fact, much of what I have read in this blog about living simply is reminiscent of exactly what my hippy friends were all about.

  17. Jim says:

    There are other issues as well…

    Like Bill has pointed out, houses are a lot different now. There is no way my wife would live in the house my mother grew up in. Heck, the neighbors would call family services and complain about the living conditions for the children. But to offset the nice things he talked about like A/C and heating, there are advances in building materials and techniques. Manufactured homes can be built very quickly and inexpensively, and even stick-built homes these days are built much faster and better than they used to be. Cranes were rare in the 60’s, but a lot of contractors have them now. Watch a crew put up the trusses for an entire house in a couple of hours sometime, or see how quickly they can blow insulation into the entire attic. Just watching the roofers with the pneumatic nail guns and comparing it to the hammers we used is dramatic.

    Our standard of living has changed. Even people on welfare that are at the poverty level have cable TV, microwave ovens, and cell phones with free long distance. Luckily, our capacity to make things has also increased. Farms are much more productive than they used to be. Modern farm machinery and center pivot irrigation techniques have increased yield and decreased production costs. And moved a lot of the employment elsewhere. One man can handle a pretty big farm these days, if he contracts out for help on those few days of fertilizer and harvesting and such. And with robotics and cheap overseas labor, we’re able to buy amazing devices that Mom and Dad haden’t even dreamed about in the 60’s. What did you buy for your children in the 60’s? Bicycles, kites, and transistor radios? A Huffy at Walmart is $25 now? Radios and kites $1? Waaay different economy.

    Transportation and the Flat Earth effect are also issues. Peole in California can pay the same for a lot of items off E-Bay as people in Colorado, but their wages are different. We can ship in bottled water from Fiji and it costs the same as bottled stuff filtered from local tap water?

    Politics have changed in a big way as well. In the 60’s they were still worrying about getting everyone electricity and running water. Nobody had even thought about how the dams would effect the salmon, or how much burning coal would heat up the earth.

    What I’m seeing is that there are still a lot of constructive jobs out there. People still build bridges and highways and sky scrapers and loaves of bread and computer programs. But it doesn’t take as much of the population to build all these things as it used to. So there are a lot more red tape jobs now. Lawyers, marketers, loan officers, salesmen, and such.

  18. Kim Bentz says:

    Some of the big differences in our times are our expectations. I remember eating out 3 or 4 times a year (except sometimes while on a road trip). It was extremely rare for us to go to McDonalds or Dairy Queen. We went to drive in movies and brought our own popcorn and Shasta soda.

    We didn’t play park and rec sports or take a lot of lessons. We took piano. No one complained. My parents bought furniture in the 60s. Then again in the 90s.

    Dad says “never buy a house that cost more than a year’s salary.” I’m not sure that is possible at all any more.

    We had people over all the time. That was our entertainment. Now I can’t get people to come over they are so busy with soccer, karate, little league, music lessons and dance class.

    Back then, there was a gold watch waiting for you at the end of a career. Now, if I make 5 years at the same place I’m the senior employee–the one who has “historical knowledge” of the company and the way systems were created.

    Back then, who thought of pension funds going belly up? Now who believes they will have a pension?

    Of course, the expectations were different. Mom used to have people over for coffee. A few cents worth of Folgers in the percolator and everyone sat and hashed things out. Now it’s a meeting at Starbucks at close to $5/head.

    I recently heard my mother telling my husband that granite countertops were the only way to go, though she had laminate for her entire married life.

    Back then, you had a dog, you fed him and played with him, and eventually he got old and sick and died. Now, I’m supposed to do extensive behavior training, have regular vet visits (not just when he’s sick), get his teeth cleaned, get him groomed, treat him for every ailment he might have, including hip replacement, and more. This is expected.

    My kid is expected to have a ton of extra-curricular activities, all with their own fees and expenses, to keep him from roaming the streets, which is what we did growing up.

    My brother went off to college with all his possessions in his backpack. My son took three truckloads, and he doesn’t even have the stuff everyone else does–no flat panel tv or big stereo. He has his three year old laptop (gasp!)and is without his own car. He doesn’t own an Ipod or Wii. A lot of these kids head off for college with less than my husband and I owned when we got married.

    I think previous commenters had it right. A lot of the changes have been due to: changing monetary policy, the availability of credit, TV, which shows us lifestyles we don’t have and makes them seem normal. (6 single friends rarely work but have lots of money to spend at the coffee shop and great apartments in New York City.) The shifting of corporate values due to a global competition affects the way we work, the way we are compensated and changes the expectation of longevity with a company. Corporate buy-outs and mergers add to that as well.

    Trent is right, you must take into account the era your advisor comes from. Some advice may still work. How about your depression era grandparents who said “Pennies make dollars” and showed what it was like to live frugally and invest. Mine lived much more comfortable lives as a result. They understood that econimic shifts can mean the loss of job and that you must take care of yourself. They had seen the world fall apart and knew that it could happen again. Even though they may have found one of those lifetime positions, they never trusted in it, but took care of themselves.

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