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Did Your Grandparents Have A Financial Adviser?

16 April 2010 9 Comments

The answer to this question is probably no.  Yet, most grandparents of people I know were in pretty good financial shape.  I believe this all comes down to the fact that that generation (our grandparent’s generation) was much more frugal than us.  Personal finance was just common sense back then (and should still be today).  They didn’t need a financial “expert” to tell them how to manage their money.  They just did the common sense personal finance things that too few of us do today.

Our grandparents for the most part succeeded in the following areas:

  1. Working hard
  2. Only buying this that they could afford
  3. Avoid debt
  4. Saving money

Notice, the following things were not on that list:

  1. Start a business
  2. Make huge gains in the stock market
  3. Killed it in real estate

No, our grandparents did the basic things and they did them well.  They didn’t need a financial adviser to tell them how to spread their capital across asset classes (the idea that everyone should be fully invested in stocks came later).

Furthermore, concepts like debt consolidation would have probably been ludicrous for our grandparents.  Someone else is going to get me out of debt?  They avoided debt altogether.

The biggest thing is that they lived within their means.  Many of our grandparents went through the Great Depression and knew how to buy only the things they needed and get more than their money’s worth out of them.  Contrast this with the short product life cycles of today  the masterful advertising which make us buy more and more stuff all the while saving less and less.

Then, we go off and spend money on a financial adviser to help us find creative ways to make up the difference.  It’s time to throw out the adviser and get back to grandma’s style of personal finance: buy only what you need, use cash and save your money.

9 Comments »

  • Mike said:

    While there is a lot of truth to what you write, I think you are overlooking a couple of very important items. The most important one I am thinking of is company provided pension plans. Between there pensions, social security and Medicare/company provided health plans there was almost zero retirement planning that our grandparent's generation had to do on their own.

    Pensions are almost extinct these days and there are serious questions about the stability of social security and especially Medicare. Furthermore this generation doesn't have the same job security that their generation had when it was common, and even expected, that you could work for one company for your entire life.

    So while I agree that some of the financial troubles of this generation (and our parents for that matter) is do to our own carelessness with money and debt, I'd disagree with you that this is the reason we need financial advisors while our grandparents did not. We need them now because the responsibilty for our financial future is on our own shoulders in a way that it never was for our grandparents' generation. In essence the companies that they worked for were their financial planners.

  • Sarah said:

    Another thing to consider is that debt was actually harder to come by in our grandparent's generation. If you couldn't afford a big house, the bank simply wouldn't give you a loan. Credit cards didn't really exist so if your grandma wanted to buy a dress, she was forced to save up to buy it. Also, if you worked fairly hard you were pretty much guaranteed to be able to stay with the same company your your entire life and receive a pension and social security for retirement. The reality is both of those things likely won't be around when I retire in 40 years so I have to put money away in a 401k, which is about 20% of my take-home pay. Medical costs and college expenses were far cheaper too (and college wasn't even necessary for many people). The majority of households were able to make ends meet on a single income, which is becoming more difficult now due to higher medical costs, retirement savings, and college loans. I don't want to sound like I'm complaining and I do think our grandparents' ways of doing things made a lot of sense but I also think it's much more complicated than the idea that they were just more frugal than our generation.

  • Kaye said:

    Great post. While I agree with Mike (above) about the absence of pensions, my grandparents also did not have the 401k options that I have. Nor did they have the means to educate themselves via the internet like I have. If I'm serious about my retirement, I can learn it. When it gets complicated (like the "Did not have" list above) is when I would seek a financial advisor.
    And as for Sarah's comment, I think all of the things that she mentioned making it harder for us are things that WE are responsible for…not society. We are responsible for whether we take on debt, regardless of how easy it is. We are responsible for saving money for college or applying for every scholarship on earth.
    I think current Americans in general are convinced that there is no lifestyle without credit card payments, toys that aren't needed, car payments, student loans, and instant gratification. I think we've (myself included) gotten ourselves into this mess.
    Sorry for the long comment…I honestly just came over to tell you that I had to laugh at this post. When it came across in my feed reader, the post had an ad in it for Charles Schwab. Ironic.

  • 20smoney said:

    I appreciate your comments (all of you). Kaye, please leave more comments! I enjoy them!

  • simple in france said:

    Yep–I think you're right about our grandparent's generation being more frugal with money. And I think the people in your comments are right about the fact that our grandparent's generation had more of an opportunity to rely on pensions and social security. They didn't have to know the ins and outs of stock markets and investing. Although. . .those who had pensions in companies who closed down, well, they were just SOL.

  • wildrevolution said:

    I appreciate what you wrote but would have something to add. Americans think a lot of financial advisers because the American books and movies tell a lot of stories about how they can become richer than everybody else on Earth, stories of success and risks. That's why they come to think maybe they could have something special, too and maybe it's time to take some financial risks to gain more. This is the problem with the American culture, it just encourage people to invest and I wonder who benefits of all these fabrications…

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