Busting Stereotypes about Families and Money

On the surface it seems puzzling. Over the past 30 years we’ve gone from a majority of single income families with children to a majority of families with two incomes. Yet, as you’re probably aware, families are saving less and have more debt than ever. As a result they’ve been hit hard by the current recession.

But why? If two-parent families now have two incomes, and more money, why aren’t they wealthier than ever?

Elizabeth Warren, Professor of Law at Harvard and the Chair of the Congressional Oversight Panel for the U.S. banking bailout, wondered too, and then went to find the data. She started with the assumption many people have. The stereotype is that families today are irresponsible with their money, spending more on fancy clothes, big cars, big houses, and new electronic gadgets. Families assume it themselves. In conversations with friends, families themselves wonder – why aren’t we better off? And they often feel like failures that they aren’t and resolve to find ways to alter their spending.

The problem is, the data Warren found didn’t support the stereotype. And even she had trouble believing the data.

Did you know:

  • Men today make $800 less than their fathers did?
  • Families today spend LESS on flexible spending items like clothing, food (including dining out), appliances and each car than they did 30 years ago.
  • Families spend MORE on the fixed expenses of housing, healthcare, a second car, childcare and taxes than they did 30 years ago.

    (All data inflation adjusted)

    As a result, in 1970 families spend ONE HALF their single income on fixed expenses.

    In 2003, families spent THREE QUARTERS of their two incomes on fixed expenses.

    Families are working harder than ever, yet have far less left over after paying for the basics. That translates into no savings and even taking on debt just to pay the bills.

    The stereotype that families have somehow frivolously spent themselves into their financial troubles is patently false. These financial struggles have everything to do with the ways in which society has changed in the last 30 years – and how more and more financial burdens and risk have been heaped on families.

    What can you do? Know that you’re not alone and it’s not a personal failure. Learn the facts so that you can plan accordingly. Speak out and help bust the stereotypes others have about families and money. Here are some resources to do just that.

  • Must-see video! In this video, Elizabeth Warren takes you through the stunning data she found.
  • Financial Fire Drill. Elizabeth Warren and her daughter Amelia Tyagi walk through their advice at the end of the book The Two Income Trap.
  • More resources for learning about and taking care of your finances.
  • Join the discussion on my Remodeling Motherhood Facebook Group.

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4 Comments

Filed under Assumptions about Mothers, Economy, Fatherhood, Money

4 responses to “Busting Stereotypes about Families and Money

  1. Hi Kristin
    Many thanks for sharing that article. I would like to bust another stereotype, that is, children in elementary school or those who are 5 years old are incapable of understanding financial principles.
    I have written 20 children’s books which explain financial principles in a story form, without jargon, numbers or equations. Do you mind adding those books as a resource, at the end of your article?
    The series is “Finance for Kidz” and information about the books is at finance4kidz dot com.
    Thanks
    Prakash Dheeriya, PhD
    Father, Author & Professor of Finance
    finance4kidz dot com

  2. It is not mentioned here, but clearly education — specifically college education often buries young adults in debt before they’ve had a chance to earn their first paycheck. Today, a private college costs on average, about $37,000 per year and that cost is increasing by 6% per year. For a child born today, that means that the first year of college alone could cost over $92,000 if this trend doesn’t change. Clearly, families’ incomes are not keeping up with this increase, and so over time if nothing is done to curb college inflation, it could become a luxury that only the wealthiest can afford. In the meantime though, families are taking on tens of thousands of dollars in student loan debt — one of the few types of debts too, that cannot be discharged in bankruptcy except in the most ridiculously severe instances.

    The assumption that “college is a good investment” may even need to be examined more closely. I recognize that statement might be controversial — and I believe that education is one of the most important things in life, and a parental obligation. However, families need to be more strategic about how much debt they are willing to take on for an education — or else the young graduates will find themselves with higher and higher debt loads and less financial flexibility when they get married and start their own families. In other words, if the degree doesn’t earn big bucks, then it may be unwise to borrow, or encourage a teenager to borrow big bucks to pay for it.

    Wishing everyone good health, good education and good quality of life.

  3. Pingback: In the Battle of Banks vs Families, Elizabeth Warren is the Champion of Families « Kristin Maschka's Blog

  4. Pingback: Why Families are Feeling the Squeeze « Kristin Maschka's Blog

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