NC State Economist Dr. Mike Walden – Frugal Young People
The recession and slow recovery have forced American households to tighten their belts and reign in their spending and borrowing, but has any group taken on this behavior more avidly than others? N.C. State University economist Mike Walden responds.
“This is a real interesting question …, and we have some new research that really answers yes to your question. And it’s young people. … It’s really young people in our country who are really avoiding going into debt.
“For example, if we look at the years from 2007 to 2010, which was the bulk of the recession, households under the age of 35 reduced their debt by a whopping 35 percent. … Households over the age of 35 reduced their debt by only 8 percent.
“What we’re finding, for example, is fewer young people are wanting to own a home. They say, ‘Why do that? I’ll rent.’ They’re actually avoiding buying vehicles; they’re leasing vehicles or using public transportation.
“And so it’s an interesting question as to why young folks seem to have taken on this frugality more than older folks. I think one reason is, simply, they’re young, and in many cases the recession did hit young folks harder – young folks who don’t have experience in the job market, who are out trying to get new jobs when the economy was down.
“So it’s going to be very interesting from an economist’s perspective to see if these trends continue or if, when the economy does turn around more rapidly, you’re going to see changes in how young people go into debt.”