March 5, 2006

The Status of our Typical American Family

Meet the typical American family.

It has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can’t manage to pay off a $2,200 credit card balance.

The Washington Post

Last week, as I lay on the couch hacking and coughing, I was so weak I could only press the Tivo play button. Yes, that’s my excuse for watching Oprah as she dissected three couples buried in consumer debt. Detailing one wife who had forged her husband’s signature to buy a car she just had to have, Ms. O extolled the virtues of going on a Debt Diet. She had enlisted three financial experts who would help these cash-strapped couples trim down their shopping addictions.

My wife and I watched in wonderment and disbelief. Differences in how husbands and wives deal with money can be more destructive to a relationship than sexual compatibility. How could things get so bad? The husband of this forging wife looked like he had stopped off at Oprah’s on the way to his divorce lawyer.

Susie and I try to live within our means. The only debt we have is our house. And we are perfectly matched when it comes to money matters. Truth be told, when we first married I was sitting on a credit card debt of $1200 which she made me pay off. And to this day our credit cards are zeroed out each month.

Based on the Federal Reserve Board’s Survey of Consumer Finances today’s Washington Post provides further insight into a typical American family’s financial status. The article highlights various “typicals” by income level and stage of life. Like Oprah, the Post asked six financial planners to offer advice to these familial archetypes based on the results from this survey.

Given the stats, our family is doing fairly well. Although, seeing retirement loom on the very distant horizon I’ve just upped my retirement contribution. But looking to the next generation, how can we convey the notion of financial common sense to our children?

Yesterday, as I was driving my girls to their grandmother’s I tuned into their backseat broadcast:

Eldest: When I grow up I’m going to be rich. And I’m going to give a quarter of my income to charity, a quarter to you, and a quarter to Mom and Dad.

Youngest: No, I want a fifth!

Eldest: Silly, that’s less than a quarter! You need to learn fractions.

Dad: Well, that won’t leave you very much for yourself, dear.

Eldest: That’s okay. I’m going to be rich. I’m going to own Target. And I’m going to give my sister a $150 gift card.

Youngest: Wow, that’s a lot. Thanks.

Eldest: You’re welcome. But $150 to a rich person is like a $1.50 to a regular person.

I’m pleased my daughter is already planning for the future and will be taking care of her sister and her aging parents. Perhaps I should buy that new car now… No wait, a boat. NO A YACHT! Forget retirement.

Stop! Remember Oprah and that survey. Before I make any purchases I’d better wait for my daughter to buy Target outright.

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