Americans thriftier 50 years ago

By Tom Hintgen (Contact) | The Daily Journal

Published Monday, March 17, 2008

Not too long ago Americans, for the most part, were careful — and even frugal — in their management of money. Back in 1985, Americans saved 9.2 percent of their earnings. That dropped to 1.4 percent by 2003 and, today, many people are into negative savings.

“It’s painfully clear that today Americans have borrowed too much and have saved too little,” said Duluth native and Princeton professor Sheldon Garon, who spoke late last month during the Driggs Lecture Series at the University of Minnesota, Morris.

Many students from Otter Tail County, who attend UM, Morris, heard Garon talk about the addiction to easy credit.

“Our culture today seems absent of thrift,” Garon said. “Over indebtedness is well chronicled.”

And while personal savings in the United States dropped to 1.4 percent by 2003, the opposite — fiscal responsibility — was taking place in European countries and the Far East. Five years ago Germans were saving an average of 10.7 percent of their incomes. France was even higher, at 11.1 percent. In Japan people saved 6.3 percent of their income — over four times what people save in this country.

In the early years of the 20th century, savings was emphasized among both adults and children. As an example, Garon pointed out a 1920s school youth savings program coordinated by Farmers and Merchants Savings Bank, Minneapolis.

“On a Monday morning in Minneapolis, as well as in sections of Europe, kids lined up with their bags of coins to take part in the school youth savings program,” Garon said. “They learned thrift and savings from their parents.”

In the 1930s, Australia had a strong program that encouraged kids to save their coins and start savings programs.

“Even in the late 1800s, and well into the 1900s, many post offices across Europe and Japan also served as banks,” Garon said. “This made savings convenient for people. The system worked well for many years.”

During World War I and World War II, when most men were off to battle, women who stayed on the home front learned to do with less — and to save at least a little money, Garon said.

“Hard work, frugality and savings were combined into one,” Garon said. “In those days Americans also were willing to purchase war bonds to help support the war effort, all the while adhering to food, clothing and gasoline rations.”

At one time in our nation’s history, savings was a symbol of national power. Sadly, that philosophy no longer is true today, Garon said.

“During the post 1945 era, in the years following World War II, the emphasis on consumption took hold here in the United States,” he said. “Now we’re into the consumer credit mode of thinking — along with installment buying, credit card debt and home equity loans.”

Deregulation of the U.S. financial system in the 1980s also led to diminished personal savings, Garon said.

At the same time, many countries in Europe didn’t take the bait. They still have high rates of savings by individuals who save portions of their income for a rainy day.

“In my opinion, even if the trend in the U.S. is reversed, people here will never be as thrifty as we once were,” Garon said. “The good news is that many individuals and institutions are challenging consumerism. That could point some people to the right path.”

Tom Hintgen is a reporter with The Daily Journal. His column runs Mondays.