Disturbing financial statistics

[disneysteve]

I thought I'd share some data that all came from national financial magazines the past couple of days. Personally, I find these stats alarming.

1. Over the past 10 years, credit card debt among 18- to 24-year-olds has risen by 104%.

2. Only 56% of US households have any type of savings, while 44% have no savings at all.

3. 32% of households headed by someone aged 65 to 74 were carrying home mortgage debt as of 2001, an increase of 26% from just 3 years earlier.

4. Nearly 60% of households in America with children under age 18 and over half of those nearing retirement depend on their latest paycheck to meet expenses. That also includes one third of workers earning $75,000 or more.

Curious, as always, to hear your thoughts.

 

[tinaluis]

Not surprising at all. The amount of credit card debt in this country is staggering. Even more staggering, is that parents aren't teaching their children/young adults about the dangers of abusing credit cards and more of them are getting into MAJOR trouble. However, I take issue with #4 -- of course, I depend on my paycheck to meet expenses -- that's why I work (in addition to the gratification I get from work). If my paycheck were delayed, I have an EF and savings, but I definitely depend on it to pay the bills.

 

[disneysteve]

However, I take issue with #4 -- of course, I depend on my paycheck to meet expenses -- that's why I work (in addition to the gratification I get from work). If my paycheck were delayed, I have an EF and savings, but I definitely depend on it to pay the bills.

Perhaps #4 isn't clear. It says people depend on their LATEST paycheck to meet expenses. Of course, in the general sense, we all depend on our paychecks to meet expenses. But, according to that study, 60% of Americans are just one paycheck away from not being able to meet expenses. That doesn't describe you, tinaluis, as you have an EF and savings to draw from if your paycheck were delayed.

 

[DisneyBill]

I'd bet the numbers sighted don't truly expose the American Families that truly are on the verge of being in trouble, most with strong incomes. I think the averages skew the high balances that exist out there. Also, young families that are included in studies aren't any different than young families in the past who haven't had time to accumulate much money. However I think a lot of today's young are in a mindset that having money isn't a necessary factor, and they likely never will make saving a goal.

I'm a Realtor & I can tell you that a vast majority of families are carrying much, much higher balances on CCs than the "averages" I see tossed around in the press.

I've also worked with a ton of clients over age 64 that have existing home mortgages and have no hesitation at all of taking on new/larger loans.

And true, a large segment subscribes to the advertised programs of buying anything with little or no cash involvement.

Bunches of people are also having their debt-riden lifestyles catch-up with them. I just sold a modest-priced home for a senior couple that had a substained high income for ever, but had to move to free up what little equity they had to partially clear 6 figures in CC debt. CC debt because of consumer spending and not a huge financial/medical event.

Long, sorry. This subject just occassionally gets to me.

 

[Danemom]

I think it's only going to get worse. Parents aren't going to teach their children better financial management because it's the 18 - 24 yr olds who are starting to become the next generation of parents. I think we have to start educating children about this. I really think financial management classes should be integrated into schools.

 

[disneysteve]

a vast majority of families are carrying much, much higher balances on CCs than the "averages" I see tossed around in the press.

I think the same. The average CC balance often spoken of is in the $9,000 - $10,000 range. However, 40% of CC users pay their balance in full each month. So if you took the average of just those users carrying a balance, the number would be much higher.

 

[crisi]

I get being twenty three years old and living paycheck to paycheck with some debt. It takes time to build savings, and its generally expensive to go out and start living on your own after college. (Though as I'm sure Mrs. Pete would point out, you don't need to buy your work warddrobe at Nordstrom and your kitchen stuff at Williams Sonoma - its possible to get a darn good work warddrobe consignment or from T.J. Maxx and its possible to furnish an apartment from friends, garage sales, second hand stores, and a trip to Wal-Mart). And if you chose to start a family early, its going to take a long time before you really get on your feet and have financial stability (unless you get lucky and win the lottery or something).

I don't get being 60-odd years old and having a mortgage. My goal is to hit retirement age with as few expenses as I can manage - no mortgage, no credit cards, no car payments and newer transportation that is fuel efficient sitting in the garage to get me through the next 15 years (I figure with neither my husband or I working, I can get 15 years out of two cars, we won't be driving them nearly as much!). The idea of still paying for these when my income takes a hit because I'm retired scares me. The idea that I retire and start bagging groceries because I still have a mortgage and credit card payments scares me more.

I also don't get people who are 23 and have no savings and debt from getting going, and then think nothing of charging $2000 on a credit card to spend a week in the Spring in Cancun.

 

[dvcgirl]

I thought I'd share some data that all came from national financial magazines the past couple of days. Personally, I find these stats alarming.

1. Over the past 10 years, credit card debt among 18- to 24-year-olds has risen by 104%.

2. Only 56% of US households have any type of savings, while 44% have no savings at all.

3. 32% of households headed by someone aged 65 to 74 were carrying home mortgage debt as of 2001, an increase of 26% from just 3 years earlier.

4. Nearly 60% of households in America with children under age 18 and over half of those nearing retirement depend on their latest paycheck to meet expenses. That also includes one third of workers earning $75,000 or more.

Curious, as always, to hear your thoughts.

disneysteve....you're starting to sound like me...lol! I know that folks here think I'm only reporting negative news, but if you listen to the news and read a variety of different financial publications, well, the news is *frightening*.

Consumer debt is out of control in our nation. Even some of our "good debt" has become "not so good" debt with some of the high risk mortgage products out there. We're spending to beat the band and only a small minority are saving adequate amounts for retirement. The real old-fashioned pensions that many of our fathers enjoyed are dying off fast, and anyone who has a pension with 10 or more years in must be shaking in their boots.

I keep wondering when everyone is going to wake up.....

 

[kfeuer]

Truly, truly scary. Check this out (taken from Clark Howard's latest newsletter):

"A new study published in the Boston Globe shows that more than half of baby boomers are going to have to work past retirement age. By their own admission, these people don’t have enough money saved to be able to retire. Not to mention the fact that many people think they have more than they really do. About 30 percent of people have saved enough to last them about two years after retirement. And one in seven people have no money saved at all. About the same number have enough to live comfortably. So, it’s a big bell curve. Those born in the 40s, may not be able to get out of this working cycle. But if you were born in the 60s, you still have time to reverse this trend."

I work for somebody who fits into this category. He's 63 and is figuring he'll have to work until he's 70 (at least). What a depressing prospect. And yet he continues to do alot of travelling and spends money without much apparent thought to the future. I hope his health holds out. I've had a couple different family friends in the past few years who retired, then died within a year. It's just sad.

I agree with the poster who said financial management should be taught in our schools. The economy has changed so much in the past 50 years and many people just haven't taken the time to educate themselves about good money management.

I keep seeing people post that they don't think they're going to live to be very old so they just want to enjoy today. I hope to do both--live to a ripe old age and have lots of fun getting there! But even if we do die young and don't need to use much of our retirement savings, I wouldn't regret having saved it one bit. I would love to leave my children a monetary legacy that will help them build their own futures.

 

[staceyfe]

I think the real problem here is the "keeping up with the Jones'" syndrome. Society has ingrained on the American public they must have the latest plasma TV, computer, MP3 player, designer clothes, etc. When will it stop? I have to wonder how much insecurity people must have in order to feel that they must purchase the latest and greatest of everything. I guess for me, security comes in the form of knowing there's money in the bank if things suddenly turn bad. It all comes back to living within your means, and being able to accept the fact that "your means" may not afford all the latest luxeries.

 

[Chesire]

I hope this isn't too much off topic, but do you have any ideas of how to teach younger children about finances? I think my parents did a great job of teaching me (looking back, years later ...) but I have no idea about how to teach my son.

 

[DisneyBill]

I hope this isn't too much off topic, but do you have any ideas of how to teach younger children about finances? I think my parents did a great job of teaching me (looking back, years later ...) but I have no idea about how to teach my son.

I don't think its off topic at all. One of the best ways to teach children anything is by good example and open involvement. Give them some increasingly level of responsibility with the things that matter to them.

I don't necessarily believe the school system is the best place (if at all) for these social types of matters. Its sorta along the lines of teaching sex ed in school where they infer that protected sex is good sex. I don't want others teaching my kids that any debt is good debt. Dave Ramsey has put together a program he calls Financial Peace Jr. You may want to look at the merits of that.

 

[kfeuer]

I don't necessarily believe the school system is the best place (if at all) for these social types of matters. Its sorta along the lines of teaching sex ed in school where they infer that protected sex is good sex. I don't want others teaching my kids that any debt is good debt.

I don't think I'd ever equate financial education with sex ed. I don't think a quality financial ed class would tell kids what to do. Rather, show them the math on how interest racks up on credit card debt and how long it takes to pay off if you only make minimum payments. On the flip side, show them how interest compounds over time if you invest early in a 401K. Give them the facts and then let them make educated choices.

 

[staci]

I hope this isn't too much off topic, but do you have any ideas of how to teach younger children about finances? I think my parents did a great job of teaching me (looking back, years later ...) but I have no idea about how to teach my son.

I think my parents did a great job too. Beginning at age 12, my allowance was raised to about $30 a week (early 90's). My friends were all SO envious, but I had a lot of restrictions. I was given a little accounting book, and each time I was given my allowance, I had to allocate amounts for different expenses. If I remember correctly, school lunch at the time ran $6.25 for the week. 20% ($6) of the money I 'earned' was to be placed in longterm savings (college). Another 20%($6) went to my clothing fund (I was required to buy all my clothes). I was so excited about getting a car, so I always put 20% in short term savings, otherwise known as my car account. The remaining balance was my 'fun money' to be spent on entertainment, candy, toys, etc. I had my 'accounts' in buckets in my closet, and anytime the long term or short term savings reached $100 we went to the real bank and made a deposit.

As to the OP's original statement, it is sad but I do believe the statistics. As many on here know, DH and I are living a very meager life with only 1 working adult. However, we do not have ANY credit card debt, we have a comfortable amount in savings for emergencies, a small but growing IRA, and a college account started for ds. We are on target to pay off our current mortgage at age 47 as long as we continue paying what we are now, and hope to be able to increase our payment amount as our incomes grow. While we do financially live VERY MUCH paycheck to paycheck for even the basics like food (as I dont consider savings expendable income), our savings is there to fall back on should we ever have an emergency to require it. While we dont own a mansion by any means, I feel comfortable that we could live in this house as our children grow and have all the room we would ever need.

So please dont think of all younger families as being left out in the dark and fiscally irresponsible. DH and I are both 25. He is the first person in his family with ANY type of college degree, from a community college. I have my bachelors. We live our lives within our means, and while it may be very appealing to attempt to 'keep up with the joneses' we understand the importance of living within our means.

 

[dvcgirl]

I think the real problem here is the "keeping up with the Jones'" syndrome. Society has ingrained on the American public they must have the latest plasma TV, computer, MP3 player, designer clothes, etc. When will it stop? I have to wonder how much insecurity people must have in order to feel that they must purchase the latest and greatest of everything. I guess for me, security comes in the form of knowing there's money in the bank if things suddenly turn bad. It all comes back to living within your means, and being able to accept the fact that "your means" may not afford all the latest luxeries.

Yes, this is so true. Somewhere in the late 90s, when the stock market really took off the whole "Keep up with the Jones" thing really hit a whole new level. Sometimes I don't even think it's an insecurity issue with most folks, but more of a "hey, everyone else is doing it...so why not."

We've gotten to a point where it really seems like everyone can afford *everything*, but it's all smoke and mirrors and the stats that Steve threw out earlier are proof of that fact.

 

[Feralpeg]

I think part of the blame should lie with the credit card companies/banks. There isn't a day that goes by that I don't get something in the mail offering me another credit card. When these offers are thrown in people's faces, it makes it harder for people to resist. I tear them up and throw them away, but I think many people think there is no harm in having many different credit cards. IMHO credit card companies should not be able to solicit through the mail. If a person wants a card, they should have to seek a bank out to get one. That little bit of extra effort would deter many people from getting the extra cards. Also, why is it that banks can charge 21% interest, but I can only earn 4% interest on my money? I think the amount of interest that should be allowed on credit card debt needs to be lowered. I know that there are ways to get lower rates, but most people don't take those steps. The banks are making incredible profits. I have nothing against a business making a profit, but not at the expense of the good of the nation. Before people start jumping on me, I know that people should have self-control. I know that they should put more effort into looking for the best deals. I also know that it doesn't happen and it won't happen. People will just continue to go deeper and deeper in debit. It is no crime to want what you see others having, especially when stuff is thown in your face every day. Again, this is JMHO, the crime is letting people hurt themselves when there are ways to curb the abuse.

 

[Belle5]

As a nation, I think our problem lies in our collective lack of character. Few of us have any idea how to say no to ourselves or our children. To some degree I include myself in this description.

 

[TNKBELL]

I saw an episode of "60 Minutes" attributing credit card debt to several suicides amoung college students who just felt overwhelmed and left notes behind stating that, most of these young people had debt less than $5,000.00. I think it's sad that colleges allow credit card companies to openly solict thier students. So not only do the students graduate with student loans but with credit card debt....sad! I think as parents it is our responsibilty to teach our children self control and patience and maybe they'll be in a better place than thier parents!! Finances were "none of my business" when I was growing up, so by the time I was on my own, I didn't have a clue about saving or spending or comparison shopping, ect. I'm still learning, thanks to threads like this one and many financial planning books including Dave Ramsey. I plan to be very open and involve my Dks as they grow and hopefully they won't make the same mistakes I have made! It's never too late to make a change.

 

[HaleyB]

It scares me and it angers me to see consumer debt grow into such a monster. It is unethical on both sides of the fence. Unethical for banks to 'loan' money beyond peoples means to pay, and unethical for people to borrow more than they can afford.

You do have some say though. Economic policy is an issue I vote on. In some ways it is much more important to me than where someone stands on many of the more 'news worthy' issues.

Have any of you read "The Great Unraveling" by Paul Krugman? Intresting read even if it is a bit out of date.

 

[MrsPete]

I'm a Realtor & I can tell you that a vast majority of families are carrying much, much higher balances on CCs than the "averages" I see tossed around in the press

My grandmother used to be a Realtor, and she used to talk about going in to sell a beautiful, upscale house in a nice neighborhood: the type that'd be two-stories with a three-car garage, huge master suite, eat-in kitchen . . . you get the picture. Anyway, she said that so often these people would have a hand-me-down sofa in the den, no furniture in the formal rooms, empty bedrooms, a card table serving as a desk in the office . . . they obviously spent all they had on the house and couldn't afford to furnish it. And more often than not, these people weren't "trading down" in the house market.

I just don't want to live that way. My house may be a 1970s ranch, but it's solidly built, sits on a nice corner lot with a huge back yard, it has nice furniture in every room, AND it's 100% mine -- the bank owns nothing.