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How Economy and Unemployment Affects Multiple Generations

July 19, 2010 · 15 comments

in Personal Finance

The following is a guest post from Crystal at Budgeting in the Fun Stuff.  It’s a quick reminder to have your ducks in a row before trying to help the younger generation.

Unemployment is Closing the Bank of Mom and Dad
This article, Bank of Mom and Dad Shuts Amid White-Collar Struggle, explains that unemployment is affecting the upper-middle class as well:
Indeed, the bank of Mom and Dad is closing at a time when young people are having trouble borrowing from traditional lenders. Some 22% of young people between the ages of 18 and 34 said they’ve been turned down for a mortgage, loan or credit card in the past year, according to a February survey from FindLaw.com, a legal marketing and information site. That’s double the percentage of any other age group in its survey.
As a result, many young people are now moving home to save on rent. About 21% of young adults say they’ve either moved in with a friend or relative, or had a friend or relative move in with them because of the economy, according to a study from the Pew Research Center.
…Many parents who were set to retire are now delaying it to compensate for battered retirement accounts, leaving even fewer openings for younger workers to fill. There are an additional 500,000 workers over the age of 65 in the work force now compared with 2007.

In short, unemployment is forcing parents to cut their kids off and push back their own retirement. Those kids are having to cut expenses to get by without parental financial support. Although this seems like an obvious result, it is worth repeating as a reminder.
As I’ve said before, if you are planning to help your kids, I’d suggest making sure to cover your own bases first. I feel much sorrier for the parents that are pushing back their retirement than the young adults being turned down for mortgages and credit cards.

What do you think? Should retirement be a higher priority than aiding your kids in college? Are you having similar problems right now…am I misjudging the situation?

From Kris:  Have you ever been forced to move in with a family member for financial reasons?  If so, how did it work out?  Would you consider compensating that family member once you got back on your feet?

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{ 10 comments… read them below or add one }

Vicky July 19, 2010 at 12:29 pm

I think the experts would agree with you.

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Budgeting in the Fun Stuff July 19, 2010 at 3:02 pm

Yeah, as I’ve heard all over the web, “There aren’t any scholarships for retirement”.

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Young Mogul July 19, 2010 at 1:52 pm

Suzie Orman says parents should not put off their retirement to help adult kids and I agree. I didn’t receive any of the typical financial assistance from parents (no college payments, no help with first car or apartment) and I turned out just fine and it made me more financially responsible.

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Budgeting in the Fun Stuff July 19, 2010 at 3:02 pm

Since I knew I wasn’t going to get much help, I was more motivated to sign up for scholarships too. 🙂

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Sandy L July 19, 2010 at 3:41 pm

I agree. I totally don’t understand why many people put their kid’s 529 plans ahead of retirement on their PF to do lists.

Plus, I think your retirement savings don’t count as assets towards financial aid eligibility during the years prior to your kid entering college.

Since my daycare alone is almost as much as state tuition for a year, I figure worst case, I can pay as I go once the kids reach that age. If I can do it with daycare, I certainly can do it with college.

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Budgeting in the Fun Stuff July 19, 2010 at 11:00 pm

Daycare is insane! Two of my friends told me about how much they pay and I don’t feel so bad about my constantly broke Pug…

Pay as you go works…that’s how I pulled it off. It’s also how we paid for hubby’s grad school.

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David Begum October 6, 2010 at 1:04 pm

the unemployment rate on our country is growing bigger and bigger due to government mismanagement,~~

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NLP Book&nbsp October 20, 2010 at 2:30 pm

unemployment is of course a socio-economic problem that we must address seriously.”;

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Philip February 1, 2011 at 9:42 pm

Retirement should definitely be a higher priority. You can’t get a loan for retirement. No bailout there. Except the measly SS check. Great point you make about unemployed parents not being able to help unemployed kids or kids in school. Tough times we are facing. Really changing the landscape.

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Kris February 1, 2011 at 10:43 pm

Philip, I constantly think about how I want to be comfortable in retirement. I don’t need a fancy house, I would just like to be able to travel a little, especially if the kids all pick up and move in different directions. It is a balance of living now and saving for the future. We are maxing out our retirement savings as it is, but I would also like more set aside so my husband can retire before 59 1/2.

Thanks for visiting!

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