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How Twenty-Somethings Became Debt Scapegoats

August 23, 2010 RSS Feed Print

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It’s time for someone to stand up for twenty-somethings. For years, we’ve been labeled “generation debt.” This week’s New York Times Magazine asks, “What Is It About 20-Somethings?” before delving into all the reasons we have failed to “grow up.” And last month, Parade magazine lambasted us for draining our parents’ retirement accounts through our over-dependence on them.

[In Pictures: 8 Painless Ways to Save Money.]

The problem with all this angst over our generation is that much of it is simply not true. We are not drowning in debt. We have not failed to grow up. And perhaps most importantly, we are not sucking funds away from our parents, rendering them financially unstable. In fact, surveys show that the money flows both ways, especially as we get older. A 2008 Charles Schwab survey found that two in five people say they will eventually need to give their parents financial support, not vice versa.

Among the other myths:

1) We all live at home with our parents because we can’t afford our own homes.

This falsehood is perhaps the most pervasive, made famous by 2006’s Failure to Launch starring Matthew McConaughey and Sarah Jessica Parker. But according to the research group The Network on Transitions to Adulthood, while as many as half of young adults under the age of 24 live at home, 85 percent of them live on their own between ages 25 and 29, and 93 percent have left by age 30.

Even more noteworthy is the fact that these numbers, and the overall uptick in 20-somethings living at home as compared to the 1970s, predates the economic downturn. In other words, something else is going on besides financial factors. Could it be that our parents enjoy having us around, and ask us to live with them? More on that below.

2) We waste our money on iPods and Louboutins.

We actually care less about following the latest trends and styles than other generations, according to a slew of recent retail surveys. Instead, we’ve adopted a newer, more frugal mindset. A survey by TNS Retail Forward found that shoppers in their 20s and 30s are most likely to buy the least expensive versions of products. In many ways, the recession shaped our buying habits just as we were coming of age as consumers.

[Visit the US News Personal Finance site for more insight and money management tips.]

3) We have no money.

It’s true that our generation faces a high unemployment rate. By some measures, one in five 20-somethings are currently unemployed. But many of us have great jobs with impressive benefits. Studies by the Federal Reserve Bank of Minneapolis show that after you adjust for inflation and benefits, median compensation rates have increased 28 percent since 1975.

So why does mainstream media continue to berate us for being such a scourge to society? It makes an easy story – who doesn’t like to pick on the latest scapegoat? It also makes readers feel better about themselves. If middle-aged parents are having trouble saving for their own retirement, who better to blame than their children, who have undoubtedly been draining some of their hard-earned money away from them since the day they were born. In such uncertain economic times, everyone’s searching for someone to blame for their financial instability, and their fingers seem stuck pointing at us.

But the truth is, the generations aren’t in conflict. When parents and adult children do co-habitate, it’s often mutually beneficial. If one person pays the mortgage, then the other pays the bills, or cooks the food, or at least cleans the house. One family I interviewed for my book Generation Earn split duties this way: The older couple paid the mortgage and took care of household chores, while the younger couple paid all the bills. Each of them reported saving thousands of dollars a year and planned to continue splitting costs and sharing a household indefinitely.

That’s just the kind of creative teamwork that makes it possible to thrive in the current extended downturn. Articles that promote the myth that 20-somethings are living off the hard work of their parents are focusing on the wrong story.

Kimberly Palmer is the author of Generation Earn: The Young Professional’s Guide to Spending, Investing, and Giving Back, which will be published in October by Ten Speed Press.

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I did what I was told to do. I went to college. I double majored in business and music. I worked part time jobs the whole way through so I could eat food that didn't make me sick. My parents TOLD me to go to college. When the acceptance letters came, one school offered a sizeable academic scholarship. I graduated at the top of my class. Of course I had to take it. Nobody asked, "Are you going to college?" They asked, "WHERE are you going to college?" My third year at school, the administration decided to build an athletic stadium that I NOT ONCE set foot in or used for any purpose. My tuition soared. My first year cost me $2000 out of pocket (at a private school, which was cheaper than any public school's offering). By the time I had my degree, I was over $80000 in debt.
It's completely my fault. I admit it. I was REALLY stupid for thinking I could afford college. And now I'll never pay it off, because the loan payments are the cost of a mortgage ($800 a month), except I also have to pay for housing at the same time. I wish I'd just bought a house instead and gotten work experience. Oh and interest only payments (a total racket!)? They want $450 per month for INTEREST ONLY. I could pay that every month for the rest of my life and NEVER pay off my actual debt.
What am I doing now? Working as a store manager: at $10.50 an hour. And glad to have the employment. It's enough to live on, until they start garnishing my wages, that is. What bothers me the most is that I wasted valuable time getting "educated" (ripped off) when I could have been working my starter management job 4 years ago and be somewhere better now. Oh, and I could totally be doing this WITHOUT a college education.
I guess I'm hoping for massive inflation so that one day, the amount I owe now will be the same as people pay for jeans. Then at least it would be as worthless financially as it is practically.

Angry Bird of NC 12:55PM March 21, 2012

Credit and The Laws
People are losing their homes, transportation, jobs and their dignity. I see people every day with hardships. Some might be caused by nature, or mistaken judgment, maybe even by an accident, greed, or some illegitimate act. Whatever the reason everybody has bad times in their lifetime, and they deal with it the best way possible.
What I see less of is understanding and trust. I'm sure most people would pay their bills if their creditors where more understanding. Years ago creditors cared about the people and companies that kept them in business. They were honest with real customer service. They would work with their customers if they had a problem.
The Credit Bureaus are a big part of the problems. The FICO scoring system is discriminating, and a unfair way of scoring someone's honesty. Creditors can ruin your credit via the Credit Reporting Agencies without LEGAL PROCESS. The scores and credit reports are abused by, banks and other financial institutions lending money or credit. I think it would be easier to break Russian code then understand this coding system. The FICO score should be justifiably about do I pay my debts?
Banks say they care about the small business owner and homeowners and yet the banks close up or bankrup everyday. They don't care why because they can and the government gave them that power. If the bank would work with their creditors instead of foreclosing on them they wouldn't be in the mess there in, and stuck with all those empty buildings and homes everywhere.
Today they don't care if they keep you as a customer Most of today's companies put quantity ahead of quality. A lot will misrepresent the public with false or deceiving advertisements to sell their products or service. Most will do or say almost anything to get your money. I don't think they care if their product is safe, or legal as long as it sells. So why aren’t the laws that are supposed to protect the public doing their jobs? Why are the Congress and Senate now fighting all attempts at financial reform. There is only one dictatorship in America and that is the Congress and the Senate as they have no term limits. But we all agree that the Congress and Senate should all be fired because of the way they are acting. I do not mean just the republicans but both make a two year olds actions look smart. I only have one question for the Democrat and the Republican Congress and Senate. “Is Wall Street in control of your vote?”
Don’t make a federal case out of something simple and understanding. With the mortgage crisis and the economy in a mess don't sell out the real American that works hard at a low wage job. They're the one you will need to rebuild this economy later.

Floyd of TN 4:52AM August 27, 2010

I have always disliked this penchant of the world to stereotype groups of people. Of course there are commonalities among any group, but to try to fit an entire generation of people into one generalized mold simply does not work. I know my share of both ends of what is called the 'Gen Y' generation. There are those which are holding a good job and headed for the top and there are those that live on a minimum wage job, are in debt to their eyeteeth and are helping use up their parent's retirement funds to help support them. (I certainly cannot say that it is entirely their fault. It is the parent's choice after all!) The point is, in any generation, there are the go getters and those who believe the world should take care of them. Gen Y is no exception. It comes down to the individual choices that we all make. Some families live together for economic reasons, but many others live together to have the love and support of family around them. This is nothing new. It was happening in the 1800s and is still happening today. It is unlikely that it will change for hte next generation either.

Cindy of CO 5:25PM August 26, 2010