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THRIFT // Some thoughts on the departure of America's most frugal generation

My father earned his first money when he was 3. A workman paid him a dime for bringing a glass of cold water. The dime has not been spent since. It has stayed alone in a smudged envelope for more than 75 years.

Like most Americans born in the first two decades of this century, my father was a devoted saver. He was not stingy. He was just very thrifty. From his boyhood until his death, my father saved and saved and saved. In the family of his youth, as in so many other families of that era, thrift was the secular equivalent of religion. To be wasteful was to be sinful.

His generation also had ambition and enterprise, but both were tempered by the lean, hard times of the Great Depression. Perhaps above all else, that experience molded the determination of my father and his contemporaries to provide for themselves and their families a better standard of living than they had known as children. In time, my father's college education, his drive, his skills and his thrift brought a measure of prosperity for himself, his wife, their sons and daughter. But his thrift alone sustained that prosperity long after his earning power had declined.

My father died a millionaire. Not a multimillionaire but a just-barely millionaire. His net worth at the time of his death crept ever so slightly into seven figures, but only if the tally included his life insurance proceeds, the market value of his eight-year-old car and the three-bedroom house on a 26-acre parcel with a fishing pond that was his last true home.

Sometimes I marvel at the economic discipline of my father and his contemporaries. Their commitment to thrift was visceral. Debt was widely despised. Buying on credit bordered on the criminal. The only thing that should be bought on time, my father often said, was a house.

Today, most Americans of my father's generation are in their 80s and 90s. Before too much longer, they will all be gone. With their departure, what remains of American devotion to the virtue of thrift may vanish, too.

Why did my father's generation remain so absorbed in frugality? And why do so few of their offspring seem to have inherited that trait? The answers probably began to emerge at about the same time I did, in the first wave of the post-war baby boom. The end of World War II brought millions of us babies. But it also brought an end to austerity. It brought cheap energy, new jobs, rising wages, a flood of affordable goods. Affluence arrived. And as Americans became affluent, thrift became less relevant.

In his memoir, The Good Times, Russell Baker recalls the 1950s, when a typical American family could afford "three children, a house, two cars, three weeks at the seashore, a television set and meat seven nights a week, all on a single wage earner's income." By then, most of the people of my father's generation were in their prime years for earning and saving. They had reached mid-life at mid-century, a deserved pause between hardships of war and anxieties of the nuclear era. They found time for diversion, but they generally kept their hobbies simple and inexpensive. They collected stamps. They fished. They played bridge. And they kept on saving.

Overall, today's elderly Americans have higher standards of living than any previous 65-plus generation in U.S. history. And as a group, the elderly have much higher inflation-adjusted incomes than they did two and three decades ago. Medicare and Social Security, combined with pensions and post-war prosperity, have enabled most to own their homes, live comfortably and still save for later needs.

The elderly often have more assets and fewer liabilities than their children and grandchildren. Median net worth of Americans age 65 and older is about $90,000, the Census Bureau says, compared with less than $40,000 for all American households. Only about 12 percent of today's older Americans live in poverty, in sharp contrast to the early 1960s, when a third of the elderly were considered poor.

But other factors complicate the picture. In later life, the savings zeal of the most elderly Americans has diminished while their spending, especially on medical care, has surged. Since the early 1960s, the decline in saving has been greatest among older people, while the propensity to spend has risen most among the elderly. Economist Laurence Kotlikoff of Boston University says 80-year-olds now spend in average $1.16 for every dollar that 30-year-olds spend. In the early 1960s, adjusting for inflation, the average 80-year-old's comparable spending rate was just 65 cents.

Some people take an uncharitable view of these patterns. Former Republican Sen. Alan Simpson of Wyoming has referred to the 65-plus crowd as "greedy geezers." With the steady, predictable stream of payments from Medicare and Social Security, their fear of outliving their resources has been diminished sharply. John Sabelhaus, a researcher at the Urban Institute, asserts that government policy has essentially eliminated the elderly's need to save. Third Millennium, a young-adult group pressing for Social Security reform, concludes that old people generally care too much about their own financial well-being, at the expense of future generations.

Others dismiss as "fable" the notion that the eldest generation has been this century's most frugal. It looks as if they were frugal, the argument goes, but you could also say they were the generation who enjoyed the burst of unexpected improvement in family income. In the 1940s, 1950s and 1960s, income rose much faster than in the early part of the century. The growth came as a surprise, and it was one generation's good fortune.

Habits also played a part. Many of the people who were born between 1900 and, say, 1930 had consumption habits that were far more constrained in their earlier lives than what has since become the norm. In that sense, it was easier for them to be thrifty.

But comparing generations can be tricky business. I confess that I struggle with the notion that baby boomers and Generation X-ers somehow deserve to be condemned as reckless spenders, willful wasters, lax savers. Such a sweeping judgment would be harsh, and probably unfair. In the '80s and the '90s, it has been especially hard to be thrifty. Inflation-adjusted personal incomes in America have been, on average, essentially flat for the past 25 years.

Living through the Great Depression, however, was a different matter. Hard Times, Studs Terkel's anthology of interviews with people recollecting life during the '30s, is filled with melancholy. One of the saddest is about men who, unable to stand the shame of failing as breadwinners, took their own lives so their families might make a new start with the insurance benefits.

On a visit to my mother in Rhode Island, I was introduced to several of her friends at the retirement home where she lives now. We all sat together one afternoon and talked about their upbringing, their early experiences with money and material possessions and their attitudes about thrift. The point on which they all agreed was that thrift had been a way of life for their parents.

One of my mother's friends at the retirement home was Ruth Gernsey, an octogenarian who died since my visit. Her grandparents left Germany in 1892 because they didn't want their sons to have to join the Prussian Army. Ms. Gernsey was born in 1909 in New Jersey, where the family had started a jewelry manufacturing company. In Ms. Gernsey's family, hard times in the Depression only reinforced and magnified established habits.

"We were always picking things that grew wild," Ms. Gernsey told me. "Beach plums were as valuable as gold." Her grandmother taught her to knit. She would darn and redarn the same socks rather than buy a new pair. When finally reduced to tatters, the socks would become stuffing for home-made toy animals. Empty flour sacks were bleached, then reborn as dish towels, as dust cloths and, in some households of her neighborhood, as diapers.

"We were not aware of what our parents were going through," Ms. Gernsey recalled. "We always had food. Everybody had chickens and a garden, even when we had no jobs. As a child, I felt secure."

Another retirement-home friend is Warren Rubery, now well into his 90s. Rubery got his working papers at age 14 and became an errand boy in a tool shop. He remembers working five eight-hour days and a four-hour shift on Saturday mornings for $9.36 a week. "I gave my parents most of it," he says. "I always paid my way."

Mr. Rubery's down-the-hall neighbor, Arwood Northby, recently moved in with relatives to save money. He was born in 1901 and grew up in northern Minnesota, where the Depression hit farming communities especially hard. In 1925, a bushel of wheat wholesaled for $1.44, but by 1929 it brought only $1.04, and by 1932 the price had plunged to 38 cents. Corn sold for 12 cents a bushel. Throughout the Midwest it was burned for fuel.

Many farmers couldn't keep up with their mortgage payments, and their banks foreclosed. Then the banks failed, too. The Northby family escaped the worst. He attributes their salvation to prior decades of disciplined saving. "We were taught that you don't waste anything," Northby says. "At the dinner table, we were reminded of the starving Armenians. We always saved a little for tomorrow. The leftovers from Sunday dinner would make sandwiches and soup for the rest of the week."

If thrift is akin to religion, then it must be caught, not merely taught. People like my mother's retirement-home friends "caught" thrift in their youth. I think my father did, too. He saved much of the money he earned as a boy from his two newspaper delivery routes. Part of it he contributed to the family budget. Some went toward college.

My father's family was neither prosperous nor poor. His father made a decent living most years as a broker of oil-drilling leases, a risky occupation in hardscrabble parts of Oklahoma during the '20s and '30s. As boys, my father and his two younger brothers had clean clothes, nutritious food and their own rooms in a modest but solid Victorian home not far from Tulsa's downtown. When my father was 7, his mother died while trying to give birth to a fourth child. His father delegated the upbringing of the three boys to their maiden aunt, Willie, who lived two doors away. The boys called her Aunt Biddie.

The household Aunt Biddie ran was clean, warm and inviting. An old Singer sewing machine anchored the dining room. Hand-made quilts covered the beds upstairs. The baby grand piano in the living room was a source of pride for the whole family. Short of cash but determined to encourage the musical interest of his daughters, Aunt Biddie's father had traded 100 acres of land to acquire it. (My wife plays that piano now. We expect some day to pass it on to one of our sons.)

Aunt Biddie's household was also a model of efficiency, organization and thrift. She saved and reused just about everything _ paper bags, rubber bands, shoe boxes, cigar boxes, even mayonnaise jars. She made her own underwear. On our frequent visits to her house, my brother and sister and I would climb in the huge pecan tree in her front yard, dawdle on the porch swings and hide from each other in the cool, dry basement, which was always well stocked with jars of peaches, pears, tomatoes, beets and beans. Long after food shortages ceased to be a threat and the bounty of inexpensive canned and frozen produce had made them a compelling convenience, Aunt Biddie still put up vegetables and fruits from the backyard garden.

Rather than spend money on a clothes dryer, she continued to hang her wet laundry on the back porch. In the 1960s, she probably saved a dollar a month by keeping her bargain-rate party telephone line long after everyone else we knew in town had switched to private lines. And she refrained from buying new furniture between 1939 and 1979, the year my father and his brothers had to put her in a nursing home. When she died, Aunt Biddie left a generous estate for the three nephews she had brought up as sons.

By the time my father had three children of his own, thrift had become a central part of his behavior. As a younger man, he had taught himself how to fix things rather than throw them away. He made a habit of stashing old tools, lumber scraps, pieces of rope, coils of wire, used nails, bolts, nuts and screws. For decades, he wore and cared for the same pairs of work boots, hunting boots and galoshes. After his funeral, we gave the boots to Goodwill. I kept the galoshes. My sons and I wear them now.

Saving and investing were more important than consuming, my father often told me. He was always thinking of the future, planning for it, saving for it, investing for it, trying to anticipate and prepare for whatever the future might bring. He gladly gave a good portion of his time and earnings to charities and community groups, and he encouraged his children to do the same. On many occasions, he told me that my debt was not to him and to my mother, but to the future.

My father invested in our future, in part by saving steadily for the college education of all three children from the time we were born. (My wife and I have followed his example for our three sons.) And he saved aggressively for more than 40 years for his own retirement. For his entire adult working life, he saved a significant part of each paycheck before allowing himself to spend any of it.

At career peak, he was a middle-level manager in a major oil company. He accepted transfer after transfer, and we were moved and moved again _ first to Oklahoma City, then back to Tulsa, then to Texas and to Wyoming, and finally back to Tulsa. When my father was in his 50s, he was offered promotions that would have meant moving to headquarters in Chicago. He turned them down, and his salary flattened, but his steady saving and investing kept him _ and us _ financially secure until he retired.

Retirement is the never-land where my father's surviving contemporaries are now suspended. It seems ironic that, in these final years of their lives, many of the thriftiest generation are saving a lot less _ and spending a lot more. The National Institute on Aging says that failing health of at least one spouse is the factor most to blame for reductions in household wealth among the elderly.

Failing health was a powerful threat to both of my parents in the mid-1980s when my wife and I asked them to come and live with us. They could no longer manage alone. My father had heart disease and diabetes, leading to arterial bypasses in his chest and abdomen and the amputation of one leg. We built an addition onto our house that could hold most of their belongings and accommodate his wheelchair.

In the spring after they moved in with us, my father tried for a few weeks to help me coach the Little League baseball team of my eldest son. In July of that same year, we finally found a buyer for my parents' home with the 26 acres and the fishing pond. The day the sale closed, my father died.

I think my father decided he couldn't afford his own morbidity.

I think he gave up in order to cease to be a burden to us.

At the end, above all else, I think he wanted to conserve for my mother what was left of his life savings.

Sometimes I also think he overdid the business of being thrifty. I suspect that he consumed so much of his own energy and power and capacity worrying about the future and deferring to the future that he cheated himself out of some of the joys of the present.

When my mother is gone, the savings that she and her husband accumulated over many decades may be depleted. But I find comfort in knowing that the savings will never be exhausted. The comfort comes from what remains inside my father's smudged envelope.

Frank Edward Allen, a former writer and editor for the Wall Street Journal, is dean of the University of Montana's School of Journalism.

Saving rates

The savings rate of Americans has dropped steadily during the past five decades. More than any other factor, spending among older people for health care has fueled the savings decline.

Annual consumption of goods and services+

Year 30-year-olds 70-year-olds

1960 $13,000 $9,000

1972 $17,000 $14,000

1985 $17,500 $18,900

1989 $18,000 $22,000

1992 $19,200 $25,000

1995 $19,900 $27,000

+ in 1992 dollars, including medical bills and nursing-home expenditures.

Disparities in assets available for retirement

Population category Liquid assets Total assets++

Wealthiest white retirees (top 5%) $350,000 $650,000

Median white households (ages 51-60) $18,000 $90,000

Median Hispanic households (ages 51-60) $490 $27,000

Median black households (ages 51-60) $440 $24,300

Poorest black and Hispanic retirees (bottom 40%) $0 $0

++ includes equity in real estate

Sources: Federal Reserve Board, U.S. Department of Commerce, Rand Corp.

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