Tuesday, April 17, 2012

It’s not too Late for the Boomerangers!

My parents worked incredibly hard so that their children would have better, more prosperous lives than they had. And we baby boomers largely exceeded their wildest expectations.

We’ve had the mini-mansions and two luxury cars. We’ve taken exotic vacations. We don’t do our own housework. And we’ve sent our kids to private schools and the best colleges our money can buy. We had no reason to expect that our children would not live even more comfy financial lives, did we?

That is, until the recession and near-collapse of the world financial markets drastically reduced that dream.

Young people who’ve worked hard for their diplomas in the last few years have entered a dramatically different work force than the one that greeted me as a proud college graduate.

A study by Georgetown University’s Center on Education and the Workforce found that 8.9% of recent college graduates are unemployed. And if your children do not have a college degree, that rate goes up to a whopping 22.9%.

And to further poke a stick in their eye, students emerging with their degrees have accumulated more than $1 trillion in student loans, according to the Consumer Financial Protection Bureau. The Project on Student Debt says those loans average $25,250 per person.

Rates on that debt are due to climb to 6.8% this summer. With an average term of 10 years to repay their loans, that means recent graduates could find themselves saddled with an-almost $300 per month payment upon graduation—and with no job in sight!

It’s no wonder that the rate of children moving back in with their parents has soared. These “boomerang kids” now number more than 20% of young adults.

That’s an alarming trend, to be sure. And it’s having a tremendous effect on the parents, too. The older adults find their golden years are being threatened by this additional drain—just when they thought their nest was empty!

Furthermore—although the economy, indeed, is improving, and, eventually, graduates will find jobs, the financial damage is significant.

And don’t forget about the emotional and psychological impact. A just-released study from Junior Achievement USA and The Allstate Foundation indicated that 44% of teens, 14-18 years old, think they will be worse off financially than their parents. Last year, that number was just 11%.

That’s not right!

But, fortunately, I think the tide can be changed—with a little planning.

Listen, I recall the go-go 80s, when prosperity found us baby boomers and we invented the “me” generation. Nothing was too good for us—or our children. And we overspent, period.  We didn’t save. The savings rate in the U.S. has steadily declined, for the most part, since 1980.

We became a nation of consumers, not savers. So, what did we expect our children to do?

Consequently, we have our jobs cut out for us. But the problem is not insurmountable. Our children and grandchildren can have a more promising future, if you—and they—begin now, to change the way they (and you) think about and use their money.

These are the steps that I think will do that. We must:
·         Instill the savings and investing gene in our children
·         Teach them spending and budgeting skills
·         Coach them on how to set—and— to achieve goals
·         Educate them about investing
·         Help them learn about and choose study programs that will assist them in achieving their goals and dreams (and enable them to pay back those school loans!)
·         Assist them in finding all the free college money that is available (and it is a lot!), so they won’t have to depend on student loans that may never set them free

This sounds a little familiar, doesn’t it? As I recall, this is precisely how my parents taught me!

Well, as they say, everything old is new again. But there’s no reason that our children can’t live the good life. It just takes some planning and smart choices.

And while most kids would think this sounds like the most boring thing possible, I think we can make savings and investing fun and challenging for them.

Over the next few weeks, I’ll bring you some ideas on how to do just that. Stay tuned!

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