How Recessions Shape You

by James & Miel on December 28, 2009 · 0 comments

Hello readers, I hope everyone had a nice holiday. I know I haven’t been around much; a combination of traveling and a nasty cold made sure of that. But I found this interesting article on boston.com about how living through a recession shapes our views towards money (“The Psychological Effects of Recession“).

A lot of ink has been spilt in the personal finance community about how the recession has forced people who were used to spending money however they pleased to alter their spending habits. Everyone – not only those over-leveraged – has been forced to make sacrifices in order to make ends meet. The only thing that isn’t clear is what that means going forward; after we’ve fully started our recovery (aside: some might argue that we’ve already started the recovery, but in my humble opinion, we need to get people back to work before we can really say that our economy is recovering) will those habits continue? Or will we fall back in to our previous spending habits? That is unclear, but we can look to the past for a possible indication.
Many of us have relatives who lived through the Great Depression, and although we can’t make a one-to-one comparison between the Great Depression and our current recession, we can look at how they responded. According to the research examined in the article (and anecdotal evidence from family), those in the impressionable age group – ages 18-25 – felt a significant impact on their life-long views towards money. To quote the article:
In each case, a recession during one’s impressionable years had a significant effect on political and economic attitudes. People with such an experience were more committed to redistribution, more inclined to attribute success to luck, and less likely to trust public institutions.

I look forward to seeing more studies on this topic, although it’ll be a while before any meaningful data can be extracted from our current situation. Readers, what are your thoughts on this issue?
-Michael
Twitter: @michael_dink

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