King Kong debt meets middle-class life

Ask most people if they should save more, and the likely response would be "yes." But with so many opportunities to spend, sometimes we just can't help ourselves. Shopping is even seen as an expression of patriotism: Go ahead, buy the latest gadgets, a bigger car, or another pair of spike-heeled shoes, it will be good for the economy.

The only drawback: that stubborn monthly balance on the credit-card bill. For the average American family, it's been growing steadily over the past few decades, lurking like a visitor who's overstayed his welcome - and no one knows quite how to get rid of him. Somehow, people have drifted away from the thriftiness that emerged from the Great Depression and embraced life on borrowed time.

"Americans really appear to have accepted debt almost as a way of life - they assume that's just the way it goes," says John Putnam of the Million Dollar Round Table, an association of financial planners in Park Ridge, Ill. The group found in a recent survey that 30 percent of Americans believe they probably will always have debt.

Statistics confirm the change:

• In 2003, the average credit-card debt of US households with at least one card was $9,205, up from $2,966 in 1990, according to the research firm CardWeb.com. (See chart, page 17.)

• In 1970, 44 percent of families with credit cards reported having a balance after their most recent payment, the Federal Reserve Board reports. Since the 1980s, not only have more people used credit cards, but about 60 percent have carried a balance.

• The personal savings rate in the United States averaged about 8 percent from just after World War II through the 1980s. But since 2000, it has averaged just under 2 percent, according to the Bureau of Economic Analysis.

• Personal bankruptcy filings hit a record 1.6 million in 2003, compared with 300,000 a year in the early 1980s.

Debt may not be as widespread a problem as smoking or overeating, but it's gaining attention as perhaps a form of addiction. Yes, overspending is largely a matter of personal choice, but many observers say an increasingly materialistic culture conspires against people's desire or ability to act wisely. Still others call for reform of certain practices in the credit-card industry that make it easier for people to build up balances to the point where they are trapped.

The generational shift began with the baby boomers, indulged perhaps by parents compensating for their own Depression-era childhoods, experts suggest. Also, the entry of women into the workforce led to families with more money - and less time - to spend on or with their children.

"Living within your means today is countercultural," says Nathan Dungan, author of "Prodigal Sons & Material Girls: How Not to Be Your Child's ATM." Especially for young people, he says, "it takes some real fortitude to be able to withstand the constant barrage of the marketing and the cultural pressure."

After growing up with commercials and pop-up ads at every turn, 7 out of 10 college freshmen say it's "very important" or "essential" to be well off materially - up from 4 out of 10 in 1966, according to the Higher Education Research Institute at the University of California at Los Angeles.

Couple that attitude shift with the fact that more than three-quarters of college students have credit cards and it's no surprise that some are distracting themselves with serious debt, Mr. Dungan says. By age 21, 1 out of 7 Americans has more than $7,000 in card balances, according to American Demographics Magazine. And the under-25 set are one of the fastest-growing groups (though hardly the largest) declaring bankruptcy.

The University of Minnesota went against the tide in 1998 by deciding to allow no more credit-card vendors on campus. When a health study found that credit-card debt was often linked to depression, drinking and smoking, and declining grades, the school also brought a credit counselor onto campus.

1 | 2 | 3

Next