For an increasing number of people, frugality is a chosen way of life by necessity. The Great Recession — a phrase I’ve been seeing more of recently to refer to the past year or so — has left many Americans without jobs for a long period of time. Without the income, and with less access to credit, many are choosing to live their lives in a more frugal manner. And perhaps in some cases it seems like the choice to live this way has been made for them.
Credit: dawnzy
Economic events have pushed entire generations to adopt a certain way of life. While it is just a generalization, those who lived through the Great Depression have a different attitude towards money than the Baby Boomers have. Young workers who experienced the economic decline in the 1930s came of age with an attitude towards making the most of every cent, appreciating work, and getting by with just the basic needs.
The attitudes Baby Boomers, who benefited from the post-World War II economic boom, have are more defined by access to credit. Mortgages and credit cards, as well as higher salaries, helped those in this generational segment spend more, live in better conditions, and experience more luxuries than their parents.
The tail end of Generation Y is entering the workforce now, and they are doing so in economic turmoil. And they are adapting to the recent reality of high unemployment and tighter access to credit. As a result, a very large and important demographic has been saving more and spending less than they earn. These are great qualities, recommended for anyone regardless of level of wealth or broader economic condition, but now many people are wondering if this generation will come to be defined by a return to more conservative spending values.
I don’t think these attitudes will last long, but I would not call this new frugality a “fad.”
Spending less than you earn is not cool, like a stylish shirt pattern that catches on for a year and then fades out of existence. People don’t become wiser about their finances because they read an article in a magazine about celebrities spending smart and then wish to emulate these role models. Americans don’t watch the latest episode of “Cribs,” now featuring small one-bedroom apartments near train stations and decide they want to downsize their home.
The fact that frugality isn’t a fad does not mean that it is here to stay. Although it may be sad for those of us who like to see sensible financial behavior, Generation Y and Millennials will not be defined by the Great Recession. Life moves faster in the twenty-first century. Economic cycles move faster. In the last ten years, we experienced a bubble and a burst in tech stocks, a bubble and a burst in the real estate market, a bubble and a burst in the broader stock market, and a bubble and a burst in the credit market. In previous generations, these cycles would have been spread out more.
With economic events occurring more frequently, it would be difficult for one generation to be defined by any one particular spending philosophy like frugality. Some people who have been hit hard lately may alter their behavior for the rest of their lives, but it is more likely that in general, the adaptable younger generations will return to extensive use and misuse of credit and a desire to live above their means as economic sentiment improves.
Flexo is a finance blogger and podcaster at Consumerism Commentary. You can find him on Twitter @flexo or @consumerismcommentary.
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