Saving habits of ‘The Greatest Generation

How We Can Learn from Them
The people who lived during the Great Depression era may be the only generation of people in America who truly experienced what it was like to live without.  They didn’t just live without luxury items. They lived without basic necessities, because there just wasn’t enough to go around. That level of deprivations taught them some hard lessons but also made them some of the most prosperous people in the world. Here are some things we can learn from them.

Establish an Emergency Fund
These people didn’t just save money. They hoarded it, because they didn’t know when the next paycheck might come. They stashed money in coffee cans around the house, under mattresses and in old pipes, because there was no deposit insurance at the time and they didn’t trust financial institutions. Today, we know the money we deposit is safe, yet fewer people are saving any. If people who had nothing still found a way to save, we can too. The trick is to pay yourself first and then use what’s left over to pay bills and debt. Financial experts recommend that everyone have three to six months of expenses in savings. Once you have that established, put 15 percent of your income into retirement savings.

Don’t Spend What You Don’t Have
This may be the easiest change to make. If you want to buy something, wait until you have the cash for it. There was no such thing as credit cards during the Great Depression. People paid cash for everything. If they didn’t have the cash, they didn’t buy it. It’s a little more complex in our world today, which includes plastic and cyberspace. If you want to shop online, you usually need a credit or debit card to pay for it. The lesson here is don’t buy it if you don’t have the money in your checking account to pay for it.

Mortgages
According to financial guru Dave Ramsey, only 2% of homes had mortgages in 1929. By 1962 only 2% did not. Back then, people paid cash for their homes. That might be harder to do today because homes are more expensive than they used to be, but there’s still a lesson to be learned here. Don’t buy a house you can’t afford. So many people have lost their houses in the past few years because keeping up with the Jones’ was more important than keeping up with their budgets.  If you have to get a mortgage, shoot for a 15 or 20 year term at the lowest rate possible and pay more toward your principal to pay off the loan faster. Also, keep your monthly payments to lower than 30 percent of your monthly take-home pay.

A lot of this comes down to self control. Don’t buy what you can’t afford, and don’t spend everything you make. It worked for one generation. It can also work for us – if we let it.