The Changing Value of Money Requires Mental Adjustments

Expert says understanding of costs and spending is locked in early in adulthood
By Bob Cronin,  Newser Staff
Posted Dec 24, 2022 10:31 AM CST
The Changing Value of Money Requires Mental Adjustments
A new price is pasted over the old one in a self-service laundromat in Manchester, England, in September.   (AP Photo/Jon Super)

In the 1987 film Wall Street, Charlie Sheen's character admonishes his father—played by his father—for not keeping up with the changing value of a salary that once sounded high. "50K does not get you to first base in the Big Apple, Dad, not anymore," Sheen tells him. It's not Martin Sheen's fault if he's out of touch. An expert says our comprehension of spending and what things cost is shaped at the beginning of adulthood, Emily Peck writes for Axios. That understanding "persists even when circumstances change," said Scott Rick of the University of Michigan, a professor and student of financial decision-making.

Now, inflation is changing prices so quickly that many adults are lamenting what things cost in their day—even if it wasn't that long ago. When the Federal Housing Administration said it will guarantee mortgages up to $1 million in expensive places, a Wall Street Journal editorial called it a "McMansion subsidy." But the announcement was mostly a concession to skyrocketing home prices, Peck says, not so much an expression of entitlement. That house might have cost a mere $750,000 back in the day but not anymore.

People in the job market are revising their minimums, a survey by the Federal Reserve Bank of New York found this month. On average, the lowest pay a US college graduate expects to work for is $92,000; the figure was $70,000 when the survey first asked the question in 2014. Potential applicants without a college degree said they won't accept less than $60,000—in the Big Apple or anywhere else. For people who already have a job, the average expected wage in the market went up 19.4% from March 2020 to November 2022. That's one side of the equation. On the other, Peck writes, our minds still have to catch up to the reality of rapidly rising prices. (More inflation stories.)

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