Thoughts On: Three Generations

I’ve been thinking lately about generational patterns. Likely due to the fact that I’m expecting my first child soon.

There are many patterns passed down through generations; discipline, community, political, hobby, religious, etc. The following are my early thoughts about economic patterns I’ve started to abstract into classes.

Generation Type A – Sacrificial Foundation

This generation sacrifices itself for the next generation. Typically exemplified by a strong work ethic, frugal spending habits and perseverance. A single foundation member can change the course of a family.

Often entrepreneurs and self employed. Other times working multiple jobs. Many were not able to pursue higher education or a professional track career but instead have found blue collar positions. They are able to find upward economic mobility through working hard, long hours.

There are the taxi drivers, contractors, masons, corner shop owners, garbage men and laborers of the world.

Immigrants often exemplify the foundation generation. They give up what is familiar to them, often making great sacrifices, in hopes of providing a better future for their offspring.

This generation earns more than it spends. Often mid-range earners and low spenders. They might work 60+ hour weeks for 20 or 30 years without ever going on an exotic vacation.

Generation Type B – Leverage & Enjoy

This generation possesses the strong work ethic of the foundation generation, but starts from a place of greater opportunity.

The leverage generation is able to pursue higher education or a professional track career. Often lawyers, doctors or management. They learned well from their parents though and understand the value of money – they watched their parents pinch pennies, though they might not do the same as vigorously.

One big difference between the leverage generation and the foundation generation is their standard of living in comparison to their children’s.

The foundation generation often has a lower standard of living and lower quality of life than their children – perhaps working long hours in a physically demanding and emotionally unsatisfying job, so their children can attend school and live comfortably.

The leverage generation on the other hand enjoys a standard of living about equal to their children.

Often a leverage generation immediately follows a foundation generation, but it is possible to have successive leverage generations.

They are mid to high earners and mid to high spenders. They work hard but enjoy the fruits of their labor – maybe they take the family vacations to places Hawaii ever few years.

Generation Type 3 – Enjoy & Deplete

This generation was fortunate to be born into a situation with a high quality of life. Their economic desires are met by the life they grow up in and so they have no desire for further upward mobility.

They are shielded from the hard work required by multiple generations to achieve their current lifestyle and might not see the value of living frugally. Because of this, they are often not able to offer their children the same normalized standard of living that they enjoyed.

They are mid-range earners and mid to high spenders. They enjoy the fruits of someone else’s labor but do not work comparatively hard. Perhaps they graduate college, have no career track in mind, and travel around Asia for a few months.

This generation will then pursue one of a number of paths:

  1. Following their passions: Given the economic security they are provided from the generation above them, this generation has the freedom to work for passion rather than strictly profit. Perhaps they start a lifestyle business around something they enjoy or maybe they work in the non-profit sector.
  2. Living a subsidized lifestyle: Perhaps they find a decent career, but not one that would quite provide for the lifestyle they grew up in. They are then subsidized, either directly through regular transfers or less directly through gifts that boost their standard of living beyond what they could achieve on their income alone.
  3. Spending lavishly: If the benefactors of enough income to live off of, this generation might never work, but instead only spend. They can quickly deplete any savings their family had accumulated. These are the trust fund kids that make for good reality TV.
  4. Resetting: If this generation becomes aware of the gap between their economic production and the production required to sustain the life they were familiar with, they might chose to reset. In this case they adjust their standard of living to their earnings and start a new pattern.

Do these generational patterns ring true with what you’ve experienced or read about? I’d love to hear some other thoughts as I develop these ideas.