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, 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 now...am I misjudging the situation?

Let's Get Controversial - Paying for College for Kids

I’ve decided to use this week to get through some of the controversial issues I see on other blogs. I’m simply going to post my opinions and see what you think.

Today's topic:  Fronting College Costs

My hubby and I don’t have kids, but we remember college.  I had some help from my parents and my husband was covered 100%.

I can’t think of anything concrete to base an opinion on.  I had a higher GPA than my husband, but I don’t know if money had anything to do with that.  My parents are retired and my husband’s are not, but I’m not sure if his college expenses are what held them back.  In short, I’m not sure what is best for your situation, but here’s my opinion.

I’d save for retirement before I’d save for my kid’s college expenses.  My kid can get scholarships, grants, a job, or loans.  There is none of that for retired people.  I rather not have to depend on others to provide for me in my old age, so I believe in retirement first.

What if you are good for retirement?  Well, that’s trickier.  I remember how mature and how selfish I was as a teenager.  Yes, I could handle money, but I was sooo manipulative.  I don’t believe my grades would have been worse if my parents had covered me, but I might have gotten into more trouble.  What are your kids like?  Do you think they will see your help as the miracle it is and earn their keep?  Or do you think they will party the nights away since it’s not their money?

If I was a parent and knew I could help, I’d make them this deal.  I have X amount to contribute.  If I see them working their butts off to get all the scholarships and grants as possible, I’ll help them cover the rest if I can.  If they continue to work their butts off, I’ll continue trying to help.  If at any point they decide to take advantage (like fail a class or two or become alcoholics), I’ll pull the plug.

The best idea I’ve heard of was from a lady that left a comment on a blog I read last year.  Her parents agreed to pay for the housing expenses of all 3 of their kids, but the kids had to cover everything else.  This motivated her and her siblings to get as much “free” money as possible and work summers to cover the rest.  That seemed really helpful and fair.

What do you think?  To pay or not to pay, that is the question.  Sorry, I couldn’t help myself.  :-)