A Penny Saved is a Penny Spent

My grandfather Arkady, a World War II refugee from Ukraine, stored plastic bags of leftover bread crusts in his closet in case the family went broke and hungry again. He had fled his home country in 1943 with my grandmother and mother, but he couldn't escape the fear and dread he felt as he ran from the Nazis. He was storing bread crusts well after he was secure in the balmy embrace of Berkeley, Calif., living in a house he bought for $13,000 in cash. He couldn't shake old habits. Or were they old virtues?

Now, many decades after Arkady's arrival, I also have plastic bags in my closet. But they're filled with nice clothes I'm giving away because my wardrobe is too full. The biggest life issue facing me when I open my closet door is whether to put on an Ann Taylor jacket or a Gap sweater.

As talk of recession and belt-tightening makes headlines, I wonder where and how I lost my grandfather's sense of thrift. Like many young professionals (I'm 36), I embraced the lessons of my seniors about hard work. Yet my generation racks up debt the way our grandparents used to squirrel away pennies. A study by the Journal of Consumer Research to be released next month, titled "Tightwads and Spendthrifts," finds that people ages 18 to 40 are most likely to say they're spending beyond their comfort range. While my grandfather refused to take out a mortgage, I bought my first two-bedroom condo (in a marginal neighborhood) for $450,000 two years ago with 5 percent down and an interest-only loan for the next seven years (note to boss: please don't ever fire me). Though mired in debt, I still manage to sleep most nights. "Your generation has a completely different attitude about going into debt," says George Loewenstein, professor of economics and psychology at Carnegie Mellon, who says the availability of cheaper goods, as well as Internet shopping and longer store hours, make it far easier to waste money. "It used to be that the simple opening and closing of store doors exerted some control on spending. That's all gone now," he says.

My generation grew up just as home-economics classes were being phased out and credit cards were being ushered in (the general-purpose credit card took off in the late '60s). Yet even though we're saddled with debt, I have heard more conversations about avoiding carbs than I've ever heard about hoarding bread crumbs. We discuss our sex lives more than our bills. How often do the words "frugal" or "thrifty" come up in conversation, especially as a compliment? The words have a distant ring of the 1930s to them.

But perhaps it's time to bring them back. "People in their 30s haven't really experienced a significant or long recessionary period," says consumer behaviorist Larry Compeau of Clarkson University. "I am concerned that they won't be able to respond quickly enough to mitigate what may be the damage ahead. Not only do people under 40 save less, but they have less to save." Indeed, savings as a percentage of disposable income have plummeted in the United States, from between 7 and 10 percent in the 1960s and '70s to just 0.4 percent in 2007. Whether we're officially in a recession depends on whom you talk to, but anecdotal evidence points to an emerging trend of cutbacks. High-end stores like Tiffany are seeing slower sales growth, and at Wal-Mart thousands of shoppers have been redeeming gift cards for basics like toilet paper and pasta sauce, not iPods or DVDs.

But some of the "belt tightening" is more psychological than frugal. I've hung out with playground moms who take pride in their Payless shoes, yet think nothing of wearing $150 jeans and driving SUVs. I'm no better. Does it really matter if I pack my lunch every day when I'm so deep in debt?

Actually, it does. "Just like if you skip a bag of Doritos every day you'll lose weight long term, the same goes for cutting back on small expenses," says Loewenstein. And once you decide to look for it, there is advice out there. It's even free. "Prices are going up, and the people who come to my site are trying even harder to be frugal," says a thirtysomething New York blogger, "Madame X," whose anonymous myopenwallet.net blog uses her own life as an example of how to be thrifty (don't shop with friends; cook cheap meals at home). Her blog name sounds less than virtuous. But her grandfather would surely be proud.