Every decade is known for its unique stamp on popular culture. What would the 1970s be without bell-bottoms? Can you picture the 1990s without boy bands? While these trends may go in and out of fashion, we tend to think of the financial industry as a timeless mainstay of American life. However, while certain economic principles are timeless, there have been plenty of defining money trends throughout the decades.
Let’s rewind the clock and check out some of the most popular trends from then to now. Do you think they will still hold up by today’s standards? Select a decade below:
Money Trends by Decade
- The 1950s – Saving with the Christmas Club
- The 1960s – Invest in the Future with Savings Bonds
- The 1970s – The Certified Financial Planner is Born
- The 1980s – The World is Yours with Everyday Use Credit Cards
- The 1990s – Invest in Tech with Mutual Funds
- The 2000s – Subprime Lending for Homeowners and Students
- The 2010s – Cloud Accounting and Digital Banking
- The 2020s – Trading Apps and Micro-investing
1950’s – Saving With The Christmas Club
The 1950s are the quintessential American decade. We tend to think of the time sentimentally because it personifies everyday elegance, family, and the American dream. In truth, it was a time before women could open a bank account or line of credit without a man’s signature, and Jim Crow law was still in full effect.
Nevertheless, the post-war decade produced historic economic growth and low unemployment, and it is mainly remembered for this prosperity. After WWII, the economy grew by 37%, and the average American family had 30% more purchasing power.
As the economy grew, so did the birthrate with the arrival of the first “boomers.” Growing families with disposable income started celebrating holidays in a big way. One of the biggest was Christmas. Parents who grew up in the great depression wanted to give their children comforts and advantages they didn’t have. Nevertheless, a savings mentality persisted, and so things like the Christmas Club savings account were trendy.
What Is a Christmas Club?
A Christmas club, sometimes called a holiday club, is a type of savings account where regular deposits are made throughout the year and then withdrawn to pay for holiday expenses like gifts and travel.
The accumulated savings earned interest throughout the year. Banks and credit unions introduced the idea in the early 20th century.
Christmas club accounts required holders to deposit a set amount each month and charged fees for early withdrawals to incentivize saving. These special accounts gained popularity in the 1950s through clever marketing campaigns and peaked in the 60s before declining throughout the 70s.
Still a Good Idea?
Christmas Clubs and similar savings accounts are still a good idea. Unfortunately, most banks no longer offer them. You can still find them at some small credit unions and community banks.
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1960’s – Invest in The Future With Savings Bonds
The 1960s kicked off a progressive social revolution that is still ongoing today. Young adults pushed for political, intellectual and cultural change. The decade brought the Civil Rights Movement, feminism, the Vietnam War, anti-war protests, the assassination of John F. Kennedy, and a widening gap between older and younger generations and their conservative and liberal ideologies.
Amidst this unparalleled social upheaval, Americans were asked to invest in the future with savings bonds, and they did.
Savings bonds became popular in the 1940s as a way for everyday Americans to support the war effort. They saw a surge in popularity during the 1960s.
During Kennedy’s presidency (1961 until his assassination in 1963), he encouraged Americans by bonds and helped stimulate a large enrollment in the program. While some bought bonds to show their patriotic spirit, many bought them out of habit and because they were considered a secure investment.
Employers often offered bond purchases as a regular payroll deduction. Interest rates on bonds were higher in the 1960s than they were in the previous decade. At the time, interest rates on savings bonds floated with market interest rates. Meaning a high yield on other Treasury securities meant that more interest would accrue on savings bonds.
How Do Savings Bonds Work?
A savings bond, which looks like a large cross between a bill and check, is bought for a face value. That value represents the bond’s investment, which will accrue interest over time, increasing the bond’s value until it reaches final maturity, typically in 30 years. Savings bonds are guaranteed by the Federal government, which is one reason they are considered so secure.
Still a Good Idea?
People bought savings bonds regularly through the 1990s, but popularity has dropped off considerably since then. In January of 2012, banks discontinued the sale of paper savings bonds, but electronic bonds can still be purchased with a typical growth rate of 0.1%.
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1970’s – The Certified Financial Planner is Born
The financial planning industry as we know it today was born in December of 1969. At the time, thirteen financial industry leaders gathered in Chicago to create a new profession called Certified Financial Planning (CFP.) The first Certified Financial Planners graduated in 1973.
The decade kicked off with a double-dip recession, which means a second recession started before the economy fully recovered from a previous recession. The recession and resulting bear market lasted 15-years spanning 1967 to 1982.
The recession led to double-digit inflation in 1974. Likewise, the shock wave created by the Watergate scandal and an invigorated interest in financial planning and protection were all highlights of the era. Consumers needed help navigating the struggling economy, and Certified Financial Planners materialized to heed the call.
What Do CFP’s Do?
Generally, CFPs are qualified to manage and advise consumers in all aspects of their financial life. However, they tend to focus on investments, estate planning, risk management, and retirement.
Still a Good Idea?
Yes! The profession is still very much alive and thriving. According to recent data by the CFP Board, there are currently 88,635 CFPs in the United States. You can find one of them near you by heading over to the CFP Board website.
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1980’s – The World is Yours with Everyday Use Credit Cards
According to the Federal Reserve Bank of St. Louis, the total outstanding credit card debt in the United States went from $50 billion in 1980 to around $200 billion by 1989.
During the ’80s, credit card companies discovered they could keep their rates at mid-recession levels without alienating customers. Reward programs drew in new users, and convenience helped retention. People started viewing credit cards as an acceptable convenient alternative to cash.
Why Did Credit Cards Become More Popular?
Credit cards weren’t new in the 80s—that’s just when they became mainstream. In 1982 when the recession ended, the financial services industry was experiencing a boom. To compete, they started offering consumers more enticing products: credit card travel rewards and loyalty programs.
As usage increased, credit cards transformed from loss leaders to serious money makers for financial institutions.
Still a Good Idea?
It depends. Credit cards can help you build credit, earn you valuable rewards, and be a helpful tool for financing certain purchases, but high interest can be costly. Everyday use of credit cards works best if you plan to regularly pay down your balance to keep your debt to income ratio within the recommended limits.
Sources:
- Five Money Mistakes Adults Made in the 1980s
- Give Me Liberty or Give Me Credit Cards
- Credit Cards Change With The Economy
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1990’s – Investing in Tech with Mutual Funds
Mutual funds first captured investors’ attention in the 1980s and took off in the1990’s when investors started reaching new highs and earning impressive returns. In the ‘90s, Tech companies became the perfect vehicle for mutual fund investors.
Between 1990 and 1997, the percentage of households in the United States owning computers increased from 15% to 35% as computer ownership progressed from a luxury to a necessity. This marked the shift to the Information Age, an economy based on information technology, and many new companies were founded.
To the delight of investors between 1994 and 2000, technology and telecommunication stocks grew along with rapidly developing internet prospects. People poured money into the stock market to reap the gains, at least until the tech bubble collapsed in the early 2000s.
How Do Mutual Funds Work?
Mutual funds are professionally managed investment portfolios that allow everyday investors to pool their resources with others to purchase securities. They are now mainstream investments and are the core of most individual retirement accounts.
Still a Good Idea?
Yes, for the most part investing in a mutual fund with guidance from a reputable investment firm is an excellent way to grow your portfolio. However, investing is not without some risk. Investment groups usually allow you to choose a risk tolerance.
Sources:
- Who Drove and Burst the Tech Bubble?
- Could the Tech Bubble Burst Again and How Today’s Market Stacks Up Against the ’90s
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2000’s – Subprime Lending for Homeowners and Students
What do subprime mortgages and the for-profit College model have in common? They both rose in popularity in the 2000s. However, while the subprime mortgage trend burst with the 2008 global financial crisis, for-profit colleges persist today.
In the early 2000s, banks fed demand for mortgage securities by selling mortgages to borrowers with low credit scores or other risk factors. These mortgages are called subprime. Unfortunately, when home prices fell in 2006, an overwhelming number of borrowers defaulted, triggering a domino effect that impacted mutual funds, pension funds, and the corporations that owned mortgage-backed derivatives.
Also, during the 2000’s federal grants and loans made up more than 90 percent of revenue at many schools, including for-profit colleges. For-profit schools are of concern because they often used unsavory practices to target low-income students who couldn’t afford the education they were being sold.
Much like the mortgage crisis, students took on subprime loans that any reasonable financier could predict they would struggle to pay. Adding insult to injury, student borrowers in the 2000s graduated into an inherited recession and could not afford their student debt.
The result? For-profit colleges now account for over a third of all student loan defaults.
What is subprime lending?
Subprime lending occurs when loans are granted to people who may have difficulty maintaining the repayment schedule. Typically, subprime borrowers are defined as having FICO scores below 600, although this threshold has varied over time.
Still a Good Idea?
Nope. As you might expect, the mortgage crisis and subsequent recession were a cautionary tale that has helped steer lenders and borrowers alike away from subprime mortgages. Still, subprime student lending and for-profit colleges persist.
Sources:
- The For-Profit College Story: Scandal, Regulate, Forget, Repeat
- Subprime Mortgage Crisis, Its Timeline and Effect
- For-Profit Colleges Account for a Third of All Federal Student Loan Defaults
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2010’s – Cloud Accounting and Digital Banking
In the 2010s public cloud computing exploded in popularity. This growth paved the way for innovation and financial service availability in a completely online and mobile way. Cloud accounting became the norm. By the end of the decade, digital banking and mobile banking features became an everyday necessity for everyone and no longer a convenient luxury only for the tech-savvy.
What is cloud accounting?
Cloud accounting, also known as online accounting, provides all the same functions as desktop accounting but makes the whole process accessible online rather than from a specific device or location. With cloud accounting, there is no desktop application. Instead, you log in to an always-up-to-date online solution where your data is securely saved on a cloud server.
What is digital banking?
Digital banking is bank account management that happens via the internet or a smartphone. It is very similar to cloud accounting because all the tools necessary are available online, and your data is securely stored on a server. A digital bank (also known as a neobank, internet-only bank, or virtual bank) is any financial institution without a physical location that offers banking services exclusively through online channels, including websites and mobile apps.
Still a Good Idea?
Yes. Cloud accounting and digital banking have paved the way for innovation in the financial services industry. As relatively new features, these trends are likely to stick around for a while and undergo various innovations and improvements throughout the next decade.
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2020’s – Trading Apps and Micro-investing
The 2020s will forever be defined by the COVID-19 pandemic that began it. Although the decade has only just started, hints are pointing to trends that could help shape our future. While people worldwide were in lockdown, trading and investment continued, mainly aided by mobile trading apps and eager micro investors.
As the market experienced new lows, interest in personal trading apps rose among amateur stock traders. Apps like Robinhood appealed to first-time traders in their 20s and 30s. These fledgling investors took advantage of low stock prices and started buying up stocks. It is also believed that sports betting was replaced by speculative trading when sports were canceled.
Robinhood became the app of choice and picked up 13 million new users in 2020 with a zero commission fee trading policy. This sudden influx of micro investors put Robinhood on the map, and social media created a historic new phenomenon.
Robinhood traders formed a popular subreddit discussion thread that hatched a large-scale plan. Followers were encouraged to purchase certain low-value stock en masse to drive up value. The catch: many of the targeted stocks, like Gamestop, for which history will know of this, had been bet against by hedge fund short sellers. As Robinhood Redditors bought more and more stock, wall street hedge funds lost money in a tremendous way. Gamestop short-sellers have lost an estimated 20 billion dollars.
What is micro-investing?
Micro investing involves depositing, saving, and investing small amounts of money into an investment account. The amounts are considered small in comparison to what large corporations and investment firms typically invest. Micro investors are often individuals who are aided in their efforts by micro-investment companies or apps that help them with strategy and procedure.
Still a Good Idea?
This trend’s true impact is yet to be seen, but what seems clear is that individuals crave agency and access when it comes to investing. Apps like Robinhood and social media outlets like Reddit have made that more possible than ever.
Sources:
- What is Micro Investing and How Do I Start?
- Robinhood And COVID Opened The Floodgates For 13 Million Amateur Stock Traders
- Gamestop Short Sellers Are Still Not Surrendering Despite Nearly $20 Billion In Losses
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