This Is How Americans Spent Their Money in the 1950s

By Emily Guy Birken on 12 January 2016 2 comments

Americans tend to think of the 1950s as an idyllic time when the babies were booming, the jobs were plentiful, and the country was flourishing.

Our parents and grandparents had good reason to feel prosperous. The average yearly income rose from $3,210 in 1950 to $5,010 in 1959, and post-war Americans were enjoying access to products and services that were scarce during World War II. Finding good uses for disposable income in the 1950s began the American love affair with consumerism. That love affair that continues to this day — although our spending priorities may have changed somewhat over the years.

Here's how Americans spent their money in the post-war 1950s, and how their spending habits compare to ours in the 2010s.

White Picket Fences

The American dream of owning a home has deep roots the 1950s. Not only were many of the 16 million returning WWII veterans looking to buy homes, but the GI Bill offered them liberal home loans, and the end of the war saw the beginning of the baby boom, all of which drove demand for affordable houses.

Large homebuilders met that demand. They began applying assembly-line methodology to home building — by using panelized construction and drywall rather than wet plaster — which allowed them to create "cookie cutter" tract housing, giving birth to the modern suburb. An amazing "three out of five families became homeowners, and suburban living became a national phenomenon."

There was a dark side to this housing boom, however. While favorable loans and newly built homes in suburbia were available to white veterans and families, African Americans and other minorities were actively excluded from communities, such as Levittown, and from access to home loans. These entrenched patterns of racial discrimination in housing continue to affect housing and home buying to this day.

For those who could access the American Dream in the 1950s, homeownership looked very different from today. To start, the average size of a new single-family home in 1950 was a mere 983 square feet, whereas the average new home built in 2004 boasted 2,349 square feet. According to Margot Adler of NPR, "Back in the 1950s and '60s, people thought it was normal for a family to have one bathroom, or for two or three growing [kids] to share a bedroom."

In addition, the time frame for purchasing a house has changed since the 1950s. Modern young adults consider buying a home an important step before having kids. According to Casey Shipley, a mortgage loan originator from Lafayette, Indiana, families in the 1950s saw home ownership as "something you did when you were settled and done with babies. Most families had children in their early 20s, so looking for a home was something you did after that first big promotion, maybe when you were in your 30s."

Part of that wait-to-buy-until-we're-settled mindset came from the fact that most families lived their entire lives in one home. Financing such a once-in-a-lifetime purchase with a 30-year mortgage allowed a family to have their home paid off by the time the breadwinner was ready to retire in his 60s.

The median home price in the United States in 1950 was $7,354 (which is equivalent to $71,360 in today's dollars), rising to a median of $11,900 in 1960 ($93,830 in today's dollars), and housing represented about 22% of a 1950s household budget. For comparison, the median home price in October 2015 was $281,500, and the modern household spends about 43% of its budget on housing.

Cool Rides With Tail Fins

Of course, living in a new suburban home meant dependence on another big status purchase: a car. And Americans embraced the automobile with open arms, making it the center of our culture. Just look at the rise of American auto manufacturing (one out of every six working Americans were employed directly or indirectly by the auto industry), the creation of suburbs and interstates, and the introduction of the drive-in theater, fast food, and the classic car song.

As much as Americans loved their cars, the standard was for each family to have just one automobile. Owning more than one car often indicated top-hat-and-monocle levels of wealth. The one-car family can seem pretty odd in retrospect, considering how inexpensive a new car was back in the day. At the beginning of the decade, the average sticker price for a new car was $1,510 ($14,650 in today's dollars), and rising to $2,200 ($17,350 in today's dollars) by the end of the 1950s. Modern new car prices average $33,560 in 2015.

But it's important to remember that cars of the 1950s, as solid as they may look, had vastly shorter lifespans and required a great deal more maintenance than their modern counterparts. According to Craig Fitzgerald of BestRide, "it was exceedingly common to carry a little envelope with flat ignition wrenches in the glove box, so that car owners could adjust ignition points and timing, which started going out of spec the moment you turned the car on." Additionally, cars were more likely to rust out from under you, which is why many families made do with cardboard-covered holes in the floors of their cars.

This meant cars tended to last no more than 60,000 to 80,000 miles, between the ignition point issues and the overwhelming problem with rust. All-in-all, families in the 1950s and modern families spend a similar percentage of their household income on transportation — it was about 15% of a 1950s family budget, and is about 18% of a modern family budget. The difference is that we now own multiple cars that we keep for longer and have to maintain less.

TVs and Sugary Snacks

In addition to houses and cars, there was one more big purchase families in the 1950s scrimped and saved to make: the television. TV sets cost around $200 in the 1950s ($1,600-$1,950 in modern dollars), but that was not the end of their influence on American spending. (See also: This Is How Much a "Rent-to-Own" TV Really Costs)

Changing the American downtime from radio-listening to television-watching meant that our grandparents suddenly had visual examples to imitate in real life. For instance, TV shows from the 1950s were all about families living in gorgeous, spotless houses. Watching television prompted American families to yearn for their own homes, and to spend more money on cleaning products to make their homes as squeaky-clean as the sets of I Love Lucy and Leave It to Beaver.

Television also helped to create a brand new demographic: the teenager. While teenagers were already at work forming their own subculture, advertising agencies realized that teens were a potentially lucrative group to target since they had leisure time and spending power, unlike previous generations of adolescents. So television commercials were geared toward the new demographic. Teens responded by spending their money on Coca-Cola, M&Ms, and all the other products commercials sold to them — and by influencing their parents' spending habits.

The financial power of the teenage demographic remains incredibly strong, but advertisers have had to change their tactics as our consumption of entertainment has changed.

Keeping Our Spending Habits, But Changing What We Buy

While the specifics of what Americans bought in the 1950s might look different from modern purchases (when's the last time you saw someone rock a coonskin cap?), the habits themselves were remarkably similar. Homes, cars, and the products advertised on your screen of choice are the items people most wanted to buy then, as now.

That's because the spending habits we consider normal were born in the post-war 1950s. Prior to that decade, few households could boast discretionary spending, and before television, there were not as many large-scale outlets that allowed advertisers to tempt consumers into unnecessary spending.

We may no longer consider a 983 square foot house or a car with a rusted-through hole in the floor to be normal, but our expectations for spending discretionary income remain mostly the same.

Would you have preferred to live in the 1950s? Or another decade? Let us know in the comments!

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Katie

So I'm curious about how the comparisons for the housing sizes is made. Do they include finished basements, or strictly 'above-grade' square footage?

Our house was built in 1934, and started out as a 950 square foot, 2-bed, 1-bath, 1.5 story bungalow. Over the years, different owners finished the basement and the half story/attic, and now it is a 4-bed, 2-bath with 2,100 square feet of living space, without any building additions. It is about the same size as a lot of our friends' houses, though to be fair those are mostly 'starter' houses.

So my question is, how much of the extra square footage comes from building physically larger houses, and how much comes from finishing every possible interior space in new house construction?

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Guest

There was a great deal to like about the fifties, if you were a teen growing up in those years. Of course for my generation there will never be, or seem to be a better time. It didn't really last that long, but we measured time differently then, and it left us with a lot of great memories. We loved the music, and the movies, and the cars, and we seemed to like one another a good deal better in those days as well. We grew nostalgic for it even before it was gone. In a way, many of us were like Milner in American Graffiti, who just didn't want to see it go. It was the crest of the wave. And weren't we lucky to catch it?