Is There a Generation Gap in Saving?

I'm old-school: I went to the bank to make a deposit today. (I make most of my deposits in person, inside the branch.) While I waited, I chatted with the teller, whom I know from many previous visits. “I'm writing a book about money,” I told him. “What's the one thing you wish you could tell people about banking?”

Save!” he said. He told me there's a huge generation gap between savers and spenders. “The people who save are generally older. They don't look like they have money, but they do. They've got a ton in their savings account and they chase the best CD rates. But the reason they have money is because they didn't spend it when they were younger. They've been able to let it grow.”

“And that's not what kids today are doing?” I asked.

“No way,” he said. “The young people I see spend all their money. They're trying to impress their friends. They buy all this new stuff. Their bank balances are always low. They're not going to have money saved like the older generation does.”

Then he gave me another great example. “There are people who come in here and you can see why they have money. You look at their account history, and the only thing that comes out is the big stuff, like their mortgage or their utilities. There aren't a lot of $5 or $6 transactions.”

I laughed and said, “I'll bet most people have tons of little stuff.”

“Oh yeah,” he said. “It's all little stuff. But it's that little stuff that kills you. That's what will make it so you don't have anything saved when you're older.”

Before I left, I asked him if he had any tips or tricks I should put in my chapter on banking. We talked about a couple of ideas, and then he came up with something moderately clever (though it applies to just a few people): “If you're going to overdraw your account,” he said. “Do it all at once.”

“What do you mean?” I asked.

“Well, let me give you an example. The other day, a lady called me to complain about overdraft fees. She'd been hit with a bunch of them at the same time. But when I looked at her transactions, I couldn't believe it. She'd gone to the same grocery store four times on the same day, so she was hit with four overdraft fees. If she'd just gone once, she'd still have overdrawn her account — but only once.”

The teller also mentioned that nobody seems to know their bank balance anymore. “They don't use a check register,” he said, “so they have to call to ask how much they have. But the problem is that what we show you have and what you actually have can be two very different things. It can take up to a week for some transactions to show up. You should track your spending, and not just trust what the ATM says.”

I thanked the teller — who looks like he's 25, by the way — and left.

I wonder if it's true that there's a generation gap in saving. Has the older generation always saved? Or did they start out trying to impress their friends, too? I feel like I'm at a middle point, moving from the “spend to impress” mode of operating to a “who cares what other people think?” way of life. The latter is more liberating and it helps my bank balance.

I'm going to try to find time to interview my neighbor for my book's banking chapter. I think she's a manager at a nearby bank. I'd be curious to see what advice she has for people. But really, it doesn't seem like there are a lot of fancy things you can do with a bank account. As long as you're saving, you've shopped around for a good account, and you're not afraid to ask to have fees waived, I think you're golden!

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Tyler Karaszewski
Tyler Karaszewski
10 years ago

My parents didn’t save money until they started getting older. You didn’t start saving money until you started getting older (no offense).

This isn’t “people born before 1970 save”, it’s “people over 35 save”.

Young people usually don’t have much to save, anyway. They have lower-paying jobs, less-established careers, cars that aren’t paid off (it takes five years for most people to pay off a car).

It’s easier to save once you’ve established yourself.

Lesley
Lesley
10 years ago

Ditto Tyler, but I would also add that there’s just a lot more temptations now. Even if you go back 20 years, there wasn’t a coffee shop on every corner, specialty stores with fascinating items, and there certainly wasn’t anything like the internet making the rarest of items accessible to anyone with a computer!

Jonathan
Jonathan
10 years ago

Overall, I love your blog, but this post left me cold. I understand the dialogue device you’re using, but I think it’s very important for this type of post to have a feeling of authenticity. This post just feels forced and faked (as these “Some guy on the street said this” posts often do), and it really bothers me for some reason. Was it really necessary to put these words in a banker’s mouth to make your points?

Alicia
Alicia
10 years ago

@Jonathan I used to work at a major bank on the west coast and this point is exactly true. I was a phone banker and people used to call in all the time to see what their darn balances were and then ask why they had a negative balance and when I explained that it was because they had overdrawn their account they screamed and yelled at me that they couldn’t feed their children because of me, not because they had gone shopping last week and spent all their money. I am 27 and my husband and I are huge… Read more »

Craig
Craig
10 years ago

Sure there may be a difference in mentality but there is also a difference with the times and technology. Things like cell phones, digital cameras, HDTV, computers may not seem like things you have to have, but living in 2009 so the younger generation that are. And they are expensive, very expensive. Expenses are higher in general, taxes are up, and salaries are staying the same and actually for the younger generation a lot of people are getting paid less money just because a job is a job and this is in more expensive cities. In a lot of ways… Read more »

kathi
kathi
10 years ago

For the chapter on banking, I’d be interested in advice on how to manage more than one bank/more than one account. I started with savings/checking at one bank, then added another (to split discretionary spending from regular bills) then added a credit union high-interest account, an account for my teenage son, an online savings for emergency fund, etc. One day I discover I have 9 bank accounts (not to mention loans, retirement and college savings). That’s a bit too much! Do you use more than one account to manage spending? How many is too many? Managing your accounts at different… Read more »

Mary W
Mary W
10 years ago

I think it is, in part, a generational thing. When I got my first promotion in my first job, I started a saving alotment of $50 dollars every two-weeks. I was making $2.50 a hour. I don’t know any 19 year olds now who save $50 a pay check although they are making far more than I did almost 40 years ago.

I was rasied by children of the depression and those lessons stuck with me.

Josh Wheeler
Josh Wheeler
10 years ago

Actually… I liked the storytelling man on street device used, or whatever you call it. It sounds totally authentic to me. Real event, real person, real advice. In a blog post it seems right at home. As to spending, it’s amazing how much those ‘little purchases’ add up. Cut that card swipe at starbucks every morning, the swipe at the fast food for lunch or dinner, and go for a walk instead of the movie theater. It’s amazing how much more money is left at the end of the month. Why it’s enough to pay for health care!! (If we… Read more »

Gena
Gena
10 years ago

I guess I’m a lot like that teller. I’m 25, my husband and I have over $20,000 in savings, we pay more than the minimum on his student loans each month, and we made a game out of not spending money frivolously when we moved in together 2 years ago. Most people our age our not like that – including most of our friends. Sure there are more ‘temptations’, but really, they just think they HAVE to have them. Part of it can be blamed on parents and the way the learned about money growing up, but it’s also just… Read more »

Rick Francis
Rick Francis
10 years ago

If you aren’t going to track your spending you need to have a big enough buffer so that you will never overdraw your account!

When I was younger I carried a check register and I entered both checks AND Credit card charges. That insured that I had money to pay the CC, and gave me a much more accurate true balance for my checking account.

-Rick Francis

J.D.
J.D.
10 years ago

@Jonathan (#3) !?!?!?!? This conversation isn’t a device. I’m not putting words into anyone’s mouth. This is the conversation we had. Okay, it’s not all verbatim (I jotted notes while we were talking, but had to reconstruct some from memory), but this is absolutely the meat of what we talked about just three hours ago. Other highlights in my notes: * “Money tucked at home doesn’t earn interest.” (The banker’s talking about people who stuff cash under the proverbial mattress.) * He says that young people should see out older mentors: “Find someone who worked a normal job in their… Read more »

Ezra
Ezra
10 years ago

I think a commercial bankers opinion might be a bit skewed because he doesn’t have full information. I am definitely a saver, but wouldn’t look like one to a commercial banker because I keep very little cash in my bank account (due to low interest rates). Most of my savings (and paycheck) goes directly into an online savings account or into index funds.

I can see younger people being more comfortable with online banks/online investing, whereas older folks might use the traditional checking/savings account model.

seawallrunner
seawallrunner
10 years ago

I used to spend and spend when I was in my 20s and 30s. I save and save now that I am in my 40s. At the office I see folks in their 20s going for Starbucks on a daily basis, then go for lunches at some nearby cafe. Us oldsters bring in our lunches and eat in a group in the conference room. I have learned a lot about the value of money while digging myself out of debt. Now I save and save, and if I spend, I will do so on the really important things in my… Read more »

Ms. Clear
Ms. Clear
10 years ago

I save obsessively and I’m in my 20s.

Sunandshine
Sunandshine
10 years ago

Sweet:) Loved this write-up!

I am young and I save. Have been saving up since age 12. All due to the fact that I saw my parents talk about money, about savings, about compounding. I saw my mother cook every single meal at home and restricting our trips to restaurants to only special occassions. Thats where I got my education from.

I am strong beleiver of the adage that ‘Real education begins at home”. Children generally mimic what their parents do.

Mark
Mark
10 years ago

I think older people tend to be more frugal simply because they grew up in a time where every nickel counted. My grandparents lived through the depression, and both of my parents grew up dirt poor. Every dime they made mattered, so they were very careful with their money — my mom made extra “spending” money by doing loads of laundry for her neighbors at 10 cents a load (this was pre-washing machines, by the way). Don’t forget, stores didn’t have their own branded credit cards with zero interest for 12 months, they had layaway, where you bought the item… Read more »

chacha1
chacha1
10 years ago

I can’t believe that people don’t use registers. Mine goes with me everywhere, since I run my life with my debit card. The “device,” if device it was, didn’t bother me a bit. It wouldn’t have occurred to me that J.D. would invent an interchange like this. Why should he? Also in re: the banking chapter … as well as the issue of multiple accounts/banks, a few words on tax accounts, business accounts etc would be useful. I set up business accounts for my teaching income, for the express purpose of paying my self-employment tax out of them, and don’t… Read more »

Chris
Chris
10 years ago

A bank teller? I haven’t been inside a bank since the mid 90’s and I would guess that *most* people under the age of 40 who still do, have financial troubles.

So, in this case, there as an issue of representative population of the sample groups. I’m in my late 20’s and save voraciously; most of it is automated and the rest is in higher interest vehicles.

Sara
Sara
10 years ago

I admit that I don’t keep close track of my checking account. I don’t have to, because I never cut it so close that a forgotten purchase could lead to an overdraft. I always have a cushion of thousands of dollars. I do keep a very detailed budget and review all my accounts periodically, but I can’t imagine having to check my balance before making a purchase or paying a bill.

Dotty dot dot
Dotty dot dot
10 years ago

I disagree with the notion that we have more temptations today as a reason for why people may not be saving as much as previous generations. Temptations have always existed, just in different forms. Much of what we take for granted today could have been perceived as a temptation in the past. Our North American culture evolved into a consumer based culture well over one hundred years ago. Advertisements from the late nineteenth, early twentieth century for goods ranging from electric kettles to automobiles are pervasive in print literature. Toys may have been simpler and electronic gadgets non-existant, but that… Read more »

E
E
10 years ago

Thanks, JD, this is a really interesting perspective. Personally, I don’t see it that way but I only have my own experience to go by; this guy must deal with hundreds of accounts. In my case, my 51-yr-old husband turns the theory on its head: he hardly qualifies as “young” he buys lattes and fast food, refuses to keep a check register, and overdraws his account a couple of times a year (it used to be a couple of times a month so there is hope!!) basically reminding me of an irresponsible kid. I think it’s because he was the… Read more »

eva
eva
10 years ago

@Sunandsunshine: I’m the exact opposite, I learned everything I know about money after the age of 25, my parents could never have taught me how to save because they never learned themselves. Personal finance habits may be different between generations–but for some people it’s older people that don’t know how to save. Many people who are immigrants or members of minority groups are mistrustful of “institutions” (government, healthcare, banks), partly because of language barriers but also because of fears of discrimination (sometimes justified)…whereas their children may have different habits due to acculturation. I’d be interested to know what kind of… Read more »

Lara
Lara
10 years ago

My Grandmother had a huge savings account. It’s true that she was a saver. But, she had also sold farmland she’d owned for 40 years that had slowly turned into prime suburban real estate. She was also very suspicious of the stock market and most forms of investing. There probably is a bit of a spending age gap, but a young bank teller might not be a terrific source for determining that. Personally, I think I’m a pretty good saver. My savings are primarily in equities, a rental property, and an online savings account, though. My “brick and mortar” bank… Read more »

E
E
10 years ago

@ ezra #12 good point. All of my savings is in online accounts, which the teller at my local branch would never see.

Tyler@Frugally Green
10 years ago

I’m going to jump on the devil’s advocate bandwagon and say that this teller might be missing part of the equation working at the desk of a brick and mortar shop. The internet has unlocked all kinds of money management vehicles that is primarily being taken advantage of by the younger generation. Where a Baby Boomer might have a a couple financial accounts, a Gen X or Gen Yer might have 20 or more. It seems like people my age are more willing to spread their money across a number of institutions rather than pledge allegiance to one bank because… Read more »

traineeinvestor
traineeinvestor
10 years ago

While a great post, I disagree that it is a generational issue. I know plenty of people who do not fit the sterotype for both younger and older generations.

Question: will living through the current financial crisis change people’s spending, investing and savings habits the way that living through the Great Depression did?

Patty - Why Not Start Now?
Patty - Why Not Start Now?
10 years ago

I’m thinking it’s not so much a generational thing, but a value thing. Of course one might say that younger people have different values than older people, but over the years I’ve worked with many young adults who place a high value on security. And still others who place a high value on status, which often means spending money to have all the goodies that go along with it. Or adventure, which might mean spending money on experiences that satisfy this value. My hunch is that as we age we come around to the other side a bit: the person… Read more »

Sam
Sam
10 years ago

People don’t use check registrars anymore beacuse most people don’t write very many checks anymore. We use our debit cards for everything but I don’t wip out my check registrar to record the transaction every time I use it, but I generally review it on-line once a day and get my registrar up to date. I also link my checking account to a savings account at the same bank in the rare chance I might overdraft there are no fees charged I think studies will show that the savings rate has been horible for years, whether that savings rate is… Read more »

Trevor
Trevor
10 years ago

A teller at my bank would probably say the same thing if he looked at my checking account. Little does he know I’ve got a pile of savings in ING and several investment accounts. My checking account is just a place for money to stop on its way somewhere else. I keep the balance intentionally low. I have an attached savings kept at $1000 while the rest of my savings is kept in higher-yeilding but slightly less liquid accounts. I’m 25. Maybe part of the generational gap is that younger people know how to use the internet. I don’t keep… Read more »

Rick
Rick
10 years ago

My parents weren’t savers so my grandmother taught me how to save as a boy. I in turn taught my five children who are now in their twenties and saving like crazy.

It is not really hard to save and makes life a whole lot better. My experience is the same as the teller’s. It’s all the small amounts that kill you. If you want a reasonable return that is safe and liquid try a rewards checking account.

J.D.
J.D.
10 years ago

Some thoughts: * To some degree, you’re all making a great point about the fact that young people are probably more incline to have online savings. In fact, the main reason I was at the bank today was to pull money out of a brick-and-mortar place to move it to ING. If the teller looked at my accounts, he might conclude I didn’t have much, but that’s because it’s all at ING. * Still, I think the audience here isn’t a representative sample. I’m glad most of you are saving, but I think you’re the exception, and not the rule.… Read more »

Trevor
Trevor
10 years ago

@J.D. Sure, I agree with “exception, and not the rule”. Just saying it can’t be know from what the teller sees.

Steve
Steve
10 years ago

I think both the main theories here are true – that the older generations tended to save more, AND that people tend to save more as they get older. That is, today’s 25 year old will be saving more when he’s 40 than he is now. But he will still be saving less than today’s 40 year old. (After inflation adjustment of course.)

Also, I’d be willing to bet that older people don’t have $5-6 transactions because they don’t use debit cards.

Adam
Adam
10 years ago

Hey J.D., I won’t be the exception! You know the people he was talking about that have a TON of small transactions? That’s me. Welcome to my world. I stop at the convenience store and pick up a soda quite frequently. I’ll also eat out for lunch a few times a week. I’ve always wondered what my bank account would look like if I stopped spending like that. Looks like it’s time to give it a try!

Frank
Frank
10 years ago

I agree with Sam about check registrars not really being used anymore. I use my debit card to do almost all my transactions but am careful to check my balance online at least once a week. What the teller said about the transactions not going through right away is correct. Some of my transactions don’t go through till a week and a half later. So you definitely need to treat every transaction as if the money is gone right then and there. Unless you have a significant amount as a cushion in a savings account that is linked to your… Read more »

Jim
Jim
10 years ago

I think what the teller may be seeing is that older people have more to save and are probably much more likely to come to a bank in person than younger people. Fed reserve has data on savings rates. The % of families that save isn’t a lot different based on age ranges. In fact a marginally higher % of people under 35 save than any other age group. But people in their 40’s and 50’s are able to save much more than people in their 20’s and 30’s. Older people have higher incomes than younger people. Younger people have… Read more »

Jim
Jim
10 years ago

% of families that save per age range as of 2007:

under age 35 = 58.9%
35-45 = 56.4%
45-54 = 55.8%
55-64 = 58.4%
65-74 = 56.7%
75 or older = 49.4%

Gen X Saver
Gen X Saver
10 years ago

I don’t know enough about many people’s finances to generalize, so I’ll trust the bank tellers. But I’m going to state that this is not about generations, but general maturity, that sometimes comes with age. If our Gen X household looks one generation up, we have one set of boomer parents who ran a law practice for the last 30 years (and still do) who have saved next to nothing for retirement, their house has all sorts of repair needs, and a broken window that lets the cold air in during the winter. The big spender of the couple complains… Read more »

Kent @ The Financial Philosopher
Kent @ The Financial Philosopher
10 years ago

Money can’t be saved — it can only be invested. If people think this way, they might make better choices with where they put their money.

Saving simply implies “not spending.” Investing, in contrast, implies that money is working for you. There’s a difference.

The same concept applies to time.

If you don’t address these concepts in your book, do not despair! I’ll mention it in mine (as have other authors)!

Thanks for the interesting anecdotal observations. I hope your new book is full of them!

Cheers…

Kent @ The Financial Philosopher

Lindsay
Lindsay
10 years ago

Regarding “it’s all little things” and that the older folks only have big transactions coming out of their accounts: I know that my parents and many in the older generation do not write checks or use a check card for all their little transactions. My parents just take out spending cash once a week or once a month, to pay for groceries, gas and incidentals, going out to eat, or for a big shopping trip (entailing stops at many stores in the mall, for example). I prefer to charge everything on my debit card so I can track all my… Read more »

El Cheapo
El Cheapo
10 years ago

Given my circumstances, I think said teller would probably lump me into the young non-saver crowd. I keep between 1-2K only in brick and mortar checking accounts and have about 70K liquid in online savings.

I’m about two monthly utility bills away from ridding myself of paper checks entirely. It just isn’t for me, though there is a little piece of mind in knowing that checks will be processed and an electronic copy stored for later access.

liz
liz
10 years ago

Well, back when college used to cost $50 a semester and housing didn’t eat up 50% of your income, I bet it you sure would end up with older people who think they were just more disciplined.

Amanda
Amanda
10 years ago

ha ha, this reminds me of when I was little and thought being the bank teller must be the best job because they trust you to be around much money.
I’m 32 and have been tracking my balances with quicken, etc, for at least 5 years.

Kiwi Chick
Kiwi Chick
10 years ago

My eldest son definitely fits in the “not saving” group. He gets paid and then spends his money – and overspends too. His younger brother is slightly better although he tends to save until he has enough to buy the latest “thing” that he wants. My savings record has always been very poor but at 46 I am working hard on this now. I am currently in the middle of a no-spend month (no frivolous spending) and enjoying it immensely. There are far fewer transactions going through on my account, a healthier balance and a warm, fuzzy feeling that I… Read more »

sui
sui
10 years ago

I’m not even 20 and I’ve saved a lot, ever since I first started working at 16 I tried to keep at least a 4-digit number in my savings. I used to buy quite a lot of “stuff” before, too, but now I don’t feel like I need anything at all, and limit my purchases to mostly groceries and experiences (concert tickets).

But, I do seem to be in the minority for my generation, in terms of how much I save :/

cmadler
cmadler
10 years ago

“Young” and “old” are not generations! I suspect that the generations older than Baby Boomers are heavy savers. They lived through rationing in World War II, and some lived through the Great Depression, and they were shaped by these experiences. Boomers (in general, there are always exceptions) have not been savers. Boomers generally spoil themselves, and believe the world revolves around them; they dubbed their parents the “Greatest Generation” and their children the “Next Greatest Generation.” They (again, these are generalizations that don’t apply to all) expect to inherit their parents’ wealth and to be supported by their children (e.g.… Read more »

Sarah
Sarah
10 years ago

I used to be a bank teller and all of my coworkers were in terrible financial shape. I wouldn’t take advice from one if you paid me 😛

Sarah
Sarah
10 years ago

And the reason some people don’t have “little things” coming out of their accounts is probably just because they take out a couple hundred in cash every so often and spend that on small things instead of using a debit card. Someone who appears to have nothing in savings may have their savings somewhere with better interest (like a credit union).

A bank teller sees a sliver of someone’s financial life, you can’t really much extrapolate from that.

Holly
Holly
10 years ago

As for whether or not the ’08-’09 financial meltdown (the Great Recession) will change our behaviors…I look at it as a blessing since it has scared the wits out of us! We have been working VERY hard to beef up our accounts and it’s all because we feared a full-blown economic depression. We’re entering our 40’s and have never before been so motivated to save. This ‘new’ mindset for us is here to stay, BTW. And with the nos. of jobs lost each week, a depression may be looming on the horizon; hold on to your wallets, we may be… Read more »

Sabrina Bremmer
Sabrina Bremmer
10 years ago

Here are some links which explain banking and money:

7 Page article in The Times on Goldman Sachs
http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6907681.ece?token=null&offset=0&page=1

Article in Rolling Stone on Goldman Sachs
http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine

The great American bank robbery:
http://vodpod.com/watch/2040248-how-to-rob-a-bank

How banks gained control of America:
http://video.google.com/videoplay?docid=-515319560256183936#

How to fix bad commercial banks that take in money from depositors. Simple. People power. The Dutch brought an arrogant bank to its knees in twelve days:

http://news.bbc.co.uk/2/hi/business/8323991.stm

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