The End of the World as We Know It?

Will our kids be dumb and broke? That’s the question/headline of a recent MSN Money article.

I sure hope the answer is no, but I’m not very encouraged. Every single one of my friends and peers it seems, are people who couldn’t explain compound interest if they had to, ignore the 401k matches offered by their employers (despite my pleas), are comfortable having debt, and spend like they all have huge inheritances coming to them.

And these are my college-educated peers. Fellow finance majors for crying out loud. There are many more who start with much less, have unique disadvantages, and don’t have an education or support system in place to assist them.

All these folks are starting to have children. Children! You can’t teach what you don’t know, and it seems to me that we all know precious little (a real irony in this Information Age). Is it simply a lack of experience so far, or are we actually getting dumber as the generations pass?

The truth is that we don’t know less about financial matters than our parents and grandparents did. The difference is that they didn’t need to know as much. They had pensions, they didnt’ have credit cards, and no lender would give them a loan they couldn’t afford to pay back. You had no choice but to live within your means. That is obviously not so today.

But it’s not just finance; we seem to know a lot less than we should about everything, from history to literature to science. As the information in and about our world grows, it seems our schools – and parents – are actually spreading around less of it than ever! Kids at the good schools can barely read, much less think critically.

Part of the problem may be that our parents and grandparents didn’t have mindless activities like TV and with video games competing for their attention (92% of people 18 and under play video games regularly, a quarter admit they’ve felt addicted, and almost 10% can be considered pathologically addicted, according to a recent U.S. News article). They were forced to read books, talk with each other, create and play physically active games, and so on.

Another part of the problem could be that no one in the younger few generations has ever faced a major threat to our way of life – no major wars or recessions, for instance. We seem, perhaps consequently, to be lacking the fierce patriotism, independence, and drive of our forefathers.

I’m staunchly anti- government regulation, but I’m feel less and less confident that Americans can or will make rational decisions in their own best interests. And without that, capitalism doesn’t work. “Dumber” people, for lack of a better word, are less valuable to society. And the more uneducated people there are in a society, the less valuable and productive that society is. In a that kind of society you end up needing a big government monitoring and regulating all the ignorant masses (unless you’re OK letting said ignorant masses wallow in their own poverty and misery, which a truly capitalist society would allow and recognize as necessary, as that would be the only motivation for said people to work hard and strive for education).

I realize every generation probably goes through some sort of “we’re going to be the end of civilization as we know it” crisis, and maybe I’m just pessimistic. But is it just me or are things actually getting worse – at least for Americans?

More from Meg at The World of Wealth

19 thoughts on “The End of the World as We Know It?”

  1. Have you seen the movie ‘Idiocracy’ yet? It’s pretty darn funny in this context. Not a great movie, but worth a rent.

  2. This is a great post!

    You make many excellent points.

    I would just like to add that I think there is a bit of information overload going on in many cases. There is so much information, that it’s increasingly difficult to filter out the needless from the needed. Factor that in with the fact that critical thinking is not taught in the majority of schools, and you end up with a bunch of brain dead sheep!

    But it’s not just “the system” at fault. I draw your attention to the following quote for your post:

    “…didn’t have mindless activities like TV and with video games competing for their attention ”

    Modern life is about information and choices. TV and Video games can’t compete for a parent’s attention unless the parent chooses to allow that in the first place! If my mother saw me ignoring her in favor of the TV, she turned the TV off and made sure I heard what she had to say.

  3. Well, people get smarter every generation (see the Flynn effect), so I doubt we actually “know less”. Although perhaps we know less than we should–does the amount of information we should know increase faster than the amount of information we do know? Perhaps.

  4. I remember people saying this about Gen X and we’ve actually turned out to be big savers cause we watched our boomer parents get screwed out of pensions by their employers. We all seem irresponsible til we hit 25 (some of us stay irresponsible), but many of us realize the rubber has met the road and we must change our ways.

    I think the kids (10-25) of today will be affected by the credit crisis and the housing bubble that we are currently experiencing. They’ll be better off for it. I remember coming out of high school during the early 90s and was bummed cause of the downturn in the economy. This is probably what spurred me to be conscious of how money affects us all. That and watching my parents work hard all their life – they are financially fine, but I don’t want to work in jobs I don’t like all my life just to be financially stable when I retire – I can do better than that.

  5. I’m 22, and most of the people I know are aware of the problem, they just have a sever case of the I-Don’t-Give-a-Shits…

    honestly, When I ask one of my friends how they can afford x, y, and z all the time, they go O, my parents pay my credit card, or O, I’ll just declare bankruptcy… I mean, come on people!

  6. Katharine – I had a friend yesterday casually mention the possibility of declaring bankruptcy, or “The BK” as he kept referring to it. He doesn’t even have an overwhelming amount of debt, plus there’s plenty of room in his budget! Once i told him how that would ruin his credit and dream of owning a home within a year, he was like “oh, really? Well then I guess I won’t consider that option.” So bankruptcy’s just another option on the table now, huh?

    KC – I think you’re right, people will be better off for this crunch, especially young people. I suppose the tides always turn. We got to “benefit” from the massive availability of easy cheap credit, and now our kids will probably actually have to live within their means whether they want to or not.

    Andy – I don’t know, I feel like people under 30 (in general of course) know a lot less than people over 30 about most everything – except perhaps technology. We know more about how and where to find information (i.e. how to navigate the internet), but we as a group know shockingly little about how things work, where things come from, government/history/religion, etc. I suppose we have a different type of knowledge though: an ability to store and access endless facts and tidbits of knowledge via the internet, to find the base amount of info we need quickly and then forget it, to communicate en masse…

    Joe – I think you’re right that there’s an information overload. We know lots of stuff, way more than our parents did, but it’s a different kind of substance. There’s knowing/memorizing “stuff” (which is largely what our schools teach you to do) and then there’s learning concepts, ideas, etc.

    It’s the difference between being able to answer a multiple choice test on history facts (dates, etc) and being able to write an essay comparing one period of history’s influence over another.

  7. Meg may be on to something about this generation knowing less about gov’t/history, etc. We are certainly in an anti-intellectual period right now and our school system shows it. I’m currently reading the Age of American Unreason – interesting book. I’ve often wondered why my other adult (college-educated friends) make fun of me for reading non-fiction in my free time. But anti-intellectualism would certainly explain it.

  8. Excellent post! I have to agree that I’m a little worried about the youth our generation is raising. I read a post at JW (We Need to Be Debt Free) about how his wife and children NEED cell phones, name brand food, etc. I can’t imagine demanding these things from my parents….can you say PB&J every day from K-12?

    I hope that the housing bubble does show the kids the hard times that can come from irresponsible borrowing. However, I worry that if their parents’ just blame the government/market/etc then the kids won’t learn from their parents’ mistakes.

  9. I think has less to do with “kids these days” and more to do with human nature.

    It really isn’t part of human nature to “save”, be it cash or crops. Why does the Bible remind us so often to save for the lean years? Because otherwise we wouldn’t do it ourselves.

    Those of us reading this blog- The Savers- are the exception.

    Earlier generations had forced savings via pensions, which was actually cash they never saw in a paycheck or 401k statement. While it may chafe those of us who “get it”, manditory 401k enrollment is probably a good idea. Sometimes you have to give give Human Nature a push in the right direction.

  10. I went through elementary school, high school, and 4 years of college without anyone ever mentioning compound interest! Even the math classes!

    Fortunately I had the motivation to learn personal finance on my own…but our education system has a big hole there.

  11. I actually had a conversation with the guy that came over to repair a regulator on our propane tank today. When he came in to have me sign the paperwork, he got talking, and he eventually asked what I do for a living. Of course, as soon as anyone hears what I do, they quickly go into asking for advice.

    The first thing he complained about was his wife’s 401k, saying he lost money last quarter, and since they were losing money, they stopped making contributions! He ranted a bit saying they would be better off making 1% interest in the bank, and so on. And when asked, he of course said he doesn’t participate in his company’s 401k at all, even though they offer a match.

    Clearly, I couldn’t go into a lecture on the basics of pre-tax and tax-deferred saving, dollar cost averaging, and all that, but it is always shocking to hear so many people with the same mindset.

    To make things worse, he was also quick to brag about his 29 foot twin-engine boat and souped up truck. Probably sitting on, and still making payments on 150k worth of depreciating assets in the truck and boat alone, yet stops contributing to a 401k when a few bad months hit in the market.

    And I agree it isn’t a young person problem, because this person was in his 40s, and I encounter this type of mindset every day, many are even older.

  12. I thing we are getting dumber and information overload is helping it. We can all find information if needed but we don’t know how to use it wisely. We don’t know how to put two and two together to make good decisions. And parents who kept on telling us that we were special did not help either. We may be special to our family and friends but not to others. We Americans want to lead the world??? I am afraid that we are not qualified for the role…not yet.

  13. My future mother-in-law and I were just talking about this very thing! She thinks (and I tend to agree) that Gen Y’s general sense of entitlement combined with helicopter parents just compound the problem. It’s hard to think for yourself if you have never had to try it.

  14. Well I’m glad I’m not the only one! Though I don’t believe we’re a lost cause, by any means. I think perhaps I’ve found the cause I’m willing to give/invest in…

  15. “Another part of the problem could be that no one in the younger few generations has ever faced a major threat to our way of life – no major wars or recessions, for instance.”

    We are in a major war (don’t take offense if you don’t agree). This is the 1st genertion that has not been conscripted to fight – as a result of an entirely voluteer based military, which is incidentally, comprised of mostly young people in their 20’s-30’s.

    Good post

  16. Meg, Don’t be so down – it isn’t that bad. Sure there are a lot of financially ignorant people out there, but there are a lot that know what they are doing. Nearly all of my family and friends are doing well; saving, investing, keeping debt under control.

    I think a lot of it comes down to the fact that we have had it pretty good for the last couple of decades (despite what our media would have us think). Unemployment has been low, wages have been increasing gradually, inflation has been low, and the stock market has been going up, house prices have been going up. In that kind of a world, the virtues of thrift and frugality don’t make much sense for many people. It makes more sense for them to enjoy life by buying things they don’t need with money they don’t have.

    My parents grew up during the Depression, and learned through painful experience to be frugal and thrifty. It wasn’t because of some inherent virtue or intelligence on their generation’s part (although many have that as well). Few people my age or younger have had to experience that kind of world.

  17. Sam – you are probably right. People are remarkably resilient and resourceful – when they have to be.

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