The Smiths and the Browns

Young Americans need to hear an old tale of sound stewardship | Joel Belz

Illustration by Eric Peterson/SIS

Here's a brief story about personal finance—and maybe macroeconomics as well—that I first heard about 40 years ago. I wish I had heard it 50 years ago. I hope a few 20-somethings are listening to me now.

It's the simple story of two young couples—let's call them the Smiths and the Browns—who were eager to buy their first homes.

For the purposes of this account, we'll assume that the Smiths and the Browns are virtually equal in almost everything they bring to this big purchase. Their incomes and savings are the same. Both have two young children. Their credit worthiness is the same. Their overall economic circumstances are very similar.

We'll also assume for this exercise, though it's a stretch of our imaginations in today's economy, that both the Smiths and the Browns can afford a down payment of $20,000.