If you are my age or older, my guess is that when I ask the question — do you remember layaway? — you can answer yes. Perhaps it seems like eons ago or a faint childhood memory, but you know what it is (was). My guess is if you’re much younger, especially Gen Y, you are just shaking your head and going “huh?”?

So, what is it? WiseGeek has a good explanation:

Layaway is a type of agreement which can be made between a retailer and a consumer. The consumer pays a deposit to reserve an item, which is held until the consumer pays in full. The item itself is said to be ‘œon layaway.’ Typically, the customer has a set period of time in which he or she must pay in full for the item. If the customer fails to pay, the item is returned to stock for a small fee and the consumer’s money is refunded.

It used to be quite common to purchase things on layaway, primarily because consumers were not offered lines of credit as readily. When someone wanted to purchase a big ticket item, therefore, they would have had to complete the purchase in a layaway style if they could not afford the cost up front. The rise of credit cards and store credit has made layaway somewhat obscure, but some companies do still offer it.

With the proliferation of credit cards, layaway pretty much went the way of extinction. As a company, why go through the administrative hassle of layaway when you can just get payment in full on the spot? As an individual, why bother waiting for something when you can have it now?

Of course that attitude is somewhat an indicator of what has got us to where we are in this shaky and erratic economy full of bailouts, mergers, and takeovers. On the consumer side, we are maxed out. Somehow we got into this mess because we got away from the fundamentals of actually having the means to pay for what we purchase.

I can still remember as a kid driving to the local department store with my Mom to make a layaway payment on a large purchase. Furniture, appliances, and other major items were often bought that way. The lesson was that with discipline and consistent effort (and a bit of patience) you can indeed get what you need and have things you want. I wonder how well that lesson is being taught today?

I must confess layaway hadn’t even crossed my mind until I recently saw Suze Orman on Oprah again and Oprah said “Does anyone remember layaway?”. It was part of the conversation that starts “Are we headed to a return to a cash based society?”. I personally don’t believe we’ll ever return to an all cash system, but I have to say that returning to a mindset that factors in actually being able to AFFORD the things we buy, now that’s the real secret to getting out of this economic mess and achieving financial freedom.