Wednesday, June 16, 2010

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, 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, please make 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 I misjudging the situation?

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