Two houses, several children, vacations… and all with a single monthly paycheck. This is not a riddle nor the summary of a series or a film (although it could well be the summary of the first seasons of Cuéntame), it is the reality that the vast majority of Spanish households lived between 70s and 90s. A family model resulting from the economic boom of those years and very far from the current macroeconomic situation which particularly affects the youngest.
Comparisons are abhorrent, but in this case it’s essential to be able to look back and know the exact moment when everything fell apart. According to the Fotocasa web portal and the Infojobs job portal, in Over the past 10 years, wages have increased by 3.4% while house prices have increased by an average of 8.5%.. To go further, 40 years ago, a job required 2.5 years of salary to pay for a house, today the average is almost 8 years.
It is then obvious that life is more expensive and the effort now is perhaps a little greater than that of our parents or grandparents. Even if there is something that unites the two generations, (bad) financial culture, and something bigger that separates them, the ability to save.
If the “silent generation” or the “baby boom” can boast of something, it is family economic management, where every expense was closely observed, even though it had nothing to do with it. with a more or less general knowledge of the economy, nor its functioning. And now the same thing is happening: According to the latest PISA report from the OECD, 8 out of 10 Spaniards do not know the basic concepts of economics.but the saving capacity has nonetheless declined sharply.
More needs, more expenses
In the 1980s, a 30-year-old couple with a large family of 3 children could live well on one salary, go on vacation in the summer and even buy a second home. In the 2020s, there are virtually no marriages in their twenties (Spaniards marry on average over 33), only 33% of households have children and The average age to buy a home is 41. Not to mention investing in a second property.
Quite significant changes if we take into account one of the great social advances of the 20th century. XX how women’s incursion into the world of work took place. SO,Why, even with two salaries, is the ability to save reduced?
The simple answer is that we have a lot more spending today than we did 50 years ago. The complex answer is that The social context took a 180° turn following the bursting of the real estate bubble in 2008. which brought the entire global macroeconomy under control. Yet priorities and lifestyles have changed, and some modern expenses like technology or entertainment they can divert more resources than in the past.
But at the same time as expenses have increased, income, or rather purchasing power, has also decreased. Salaries have changed over time, but they are no longer as high as before, which significantly reduces the amount allocated to savings.
To get an idea, In the mid-1970s, the minimum wage set was 8,400 pesetas, or around 50 euros, the equivalent of more than 880 euros today.. Almost the same figure as the minimum wage introduced in 2019 (900 euros). It is therefore clear that the costs of goods and services have increased over time, and what was previously acceptable to our grandparents in terms of savings is probably no longer acceptable to us today due to factors such as inflation.
And between what was yes before and now no, housing. Over the past ten years, wages have increased by more than 3%, but housing has increased by as much as 8.5%, causing the instability that characterizes the housing market today. In fact, according to the Bank of Spain, each Spaniard must make an effort of 40% of their salary to allocate it to rent or to pay a mortgage loan.
Only 20% know terms like TIN and APR
Given the gap between the economic context of 50 years ago and that of today, it is logical to think that saving capacity is not maintained at the same level. However, a question hangs over the finances of Spanish households, And accessibility to financial education is much greater today than what our parents and grandparents had: Why don’t we take advantage of it?
Perhaps the most realistic evidence of the situation of Spanish households is that Financial Education Day has only been celebrated since 2015, and this year it will do so on October 7 under the theme “Digital Finance: learn, innovate and progress”. A necessary date given that according to the Bank of Spain 8 out of 10 Spaniards do not know basic concepts like inflation, the difference between TIN and APR.
Basic terms such as diversification, liquidity, fixed term and compound interest, fundamental for savings and a prosperous family economy. Even if the worst falls to the youngest: In Spain, 1 in 4 students do not have a basic level of financial skills, despite the fact that more than 50% of them have a bank account, according to the same OECD report.
So, one of the most notable differences is the mentality towards money. For many previous generations, saving was a core value. Living below one’s means was the norm and impulsive spending was considered irresponsible. Teachings about the importance of saving were passed down from parents to children, creating a culture where saving money was essential to securing a future.
Is it the fault of technology?
However, it was the value of money that supported family savings and not one’s own knowledge or specific education. Today, Although financial education has gained ground, there is still a lack of understanding on how to manage resources effectively. Additionally, the speed of modern life and the ubiquity of technology have changed the way we interact with money, often encouraging immediate consumption rather than saving.
In fact, it is technological advances and digital transformation that have changed our relationship with money. Online shopping and instant access to bank loans and other entities, They can lead us to spend more than we actually have. Instant gratification is more appealing than the patience that saving requires. While our grandparents may have a more tangible, less immediate relationship with their finances, we face a constant stream of offers and stimuli that can make saving difficult.
The inequality between our savings and those of our grandparents can seem daunting, but it also offers us an opportunity to reflect and learn. By integrating lessons about saving and investing into our lives and families, we can create a new culture of financial responsibility.. It is essential to recognize that although the context has changed, the fundamental principles of financial management, such as living within our means and planning for the future, remain relevant.
