Wikinvest Wire

Why work when you can just spend?

Monday, August 06, 2007

This report from last week appears to have fallen between the cracks, but it is worth noting belatedly as it is another small, yet important part of a very big story that will stretch well into the next decade.

What story is that?

The impact of the early 21st century housing bubble on teenagers.

It seems that when you combine skyrocketing real estate prices and their attendant wealth effect on the greatest consumer culture the planet has ever seen, you get a lot of spendthrift teenagers who, based on the plunging labor participation rate for 16 to 19 year olds, have had almost all ambition sucked out of their system.

Teens demand back-to-school luxuries
Before Claire Stern goes back to school as a high school senior this fall, she needs a new tote. But not just any bag will do.

"I want a tote bag by Jaye Hersh that the celebrities are wearing, they're called Market Bags," said Stern, 17, who lives in Bronxville, New York. "It's more stylish than a backpack."

The bags retail for more than $100 if they're monogrammed and Stern has noticed actresses Reese Witherspoon and Jessica Alba wearing them.
...
Stern, who has saved up her own money to buy $200 Tory Burch shoes and thinks $125 Ray Ban sunglasses will be popular this year, agreed.

"Since I'm in high school and not really concerned about rent money, if I want to buy stuff for me, with money I earn, its going to be something to do with fashion," she said.

Stern added there is a limit to her back to school spending. Her parents would draw the line, for example, at an iPhone, which retails for about $600 - the total amount Stern predicts she'll spend on back-to-school shopping.

"Although it is cool and new, it is too much money and there are a few flaws in it," she said. "I understand why my parents wouldn't pay for it."
As is often times the case in reports like this, the details don't quite add up - $200 shoes, $600 total back-to-school expenses, earning, saving, parents paying, etc. - but it's a pretty safe bet that Claire didn't flip burgers for 40 hours to buy her new shoes.

Methinks the younger generation has a somewhat distorted perception of money after watching their parents gorge on home improvements, vacations, recreational gear, and second homes over the last five years.

Remember that these are the same teenagers who are going to be in the labor force paying social security taxes to fund the baby boomers' retirement over the next forty years.

I wonder how that's going to work out.

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10 comments:

Anonymous said...

Damn kids ain't worth a hoot these days. The world's going to hell in a handbasket. Hell in a handbasket I tells ya!

Unknown said...
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Unknown said...

I have seen this first hand (my girlfriends sister)...However they are going to learn the hard lesson real quick when mommy and daddy don't have money to give...and, more importantly, the have a come to jesus moment when they realize you DON'T earn $80k/yr coming out of undergraduate. At least some of us see it and are going to do our best to prepare our kids to be financially responsible.

Anonymous said...

Tim, I used to live in Bronxville, and know the kind of people who live there, so let me play devil's advocate for a moment. Her father probably commutes to Wall Street on a crowded Metro North train every morning and works probably 60-70 hours per week. Her family probably has manageable debt and a seven figure net-worth. After she enjoys her final year in high school, she will probably spend four years in college for which her father will pay entirely out of pocket, and then perhaps medical, law, or business school. In two decades, she will likely be one of the higher wage-earners. Why would you have her flipping burgers when she could just as well be reading a novel, or perhaps studying for Advanced Placement? And why do you begrudge her a few hundred dollars of back-to-school expenses, a sum that wouldn't even buy her father a decent suit to wear to work?

Tim said...

While admittedly this was not the ideal example for the point being made, it was close enough. And I don't think Claire should be flipping burgers to pay for her new pumps, though I am curious what she does to "earn" money and how much of her spending this funds. Call me old fashioned, but a little work at a young age and a little modesty are, well, old fashioned I suppose.

So, everybody from Bronxville grows up to be doctors, lawyers, and hedge fund managers? Cool!

How to Tie a Tie said...

Google doesn't like redirects but hey good for you the "bad macro" name was crap anyways, and I mean that as a fan, in a straight talk kind of way, plus if there ever was a time to have "the mess that greenspan made" as a title it would be right now, after this week people will just say " oh I get it now"

Anonymous said...

Tim, I'm not really disagreeing with your premise - more like standing up for Bronxville, or maybe for Claire. If I were to speculate on what her job is, I would think it might be some type of career-related internship. And while I did laugh at your "everyone from Bronxville" line, the fact is many of them have inherited their parents' intelligence, and will use their parents' connections and wealth to their own advantage.

I've lived in Bronxville, NY and in Silicon Valley, and my personal observation is that kids in Bronxville are more likely to feel pressure from their parents to work hard and accomplish, while many parents in SV don't seem to mind if their kids are slackers. Notice that Claire does in fact work for her money - good for her, so maybe she shouldn't be the focus of an article entitled, "Why Work?..." On the other hand I can go to any of the Silicon Valley malls and find plenty of high school seniors with no job, fancy clothes, their own car, cell phone, credit cards, etc. who would be the perfect subjects for your story.

Anonymous said...

tim - dont you understand that rich people are smarter than everyone else!!! how dare you reprint an article that claims that the rich are just as stupid as everyone else.......

Anonymous said...

Everywhere I look, I see it. People living obviously far, far beyond their means. I see the boats, the RV's, the offroad vehicles, the sports cars.

I know how expensive it is to live here - I know what houses cost, and I know I make a bit above the "median income" - and I know that if I were to go and indulge in that kind of thing, not only would I be setting a terrible example for my kids, I would be trapping my family even more deeply in debt that we already are, just based on owning a California house. I guess it's that I was raised in the midwest -

My kids have friends, whose parents are construction contractors, or school teachers - mostly people at or below the median, mostly who rent - we're talking kids who are 12, 13 years old, ipods, cell-phones, computer, xbox360, minibike, ATV, Hawaii vacations, etc. - WTF?

They get a few good months in the summer, and they spend it. They'll bring in maybe 80% of their income over 3 months (at least the contractors). They're not even thinking about saving for the kids' college, or retirement. I know it's been rough for me lately, and I have had to do that in fits and starts, but they're not even thinking about it. Their health plan? Don't get sick.

I don't get it.
For years, I was afraid that my kids would hate me for making them live "poor" - (I resented my parents for this, because I *knew* they had more money than that). I was afraid that the people around them, would rub off on them. But they seem to "get it". I guess they're smarter than I was.

Anonymous said...

Our kids get it too.

I call them the "anti-consumers".

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