September 22, 2020
More Gen-Zers are Living with Parents
When Millennials’ unemployment rate spiked during the Great Recession, millions of them alleviated their financial problems by moving in with their parents.
Now the coronavirus is chasing Generation Z back home.
Some 2.6 million adults, ages 18 to 29, who had been living on their own moved back home between February and July, the Pew Research Center reports. This pushed up the share of young adults living with one or both parents to 52 percent, which exceeds the rate reached during the Great Depression.
Pew’s analysis included some Millennials. But members of the younger Generation Z account for the vast majority – more than 2 million – of the young adults who’ve returned to the financial security of their parents’ homes this year. [This count does not include college students who came home and attended classes remotely after their schools shut down last spring.]
As was the case for Millennials, what sent Gen-Z back home was a sharp rise in their unemployment rate, Pew said. For example, the rate for people in their early 20s has more than doubled this year to 14.1 percent.
No age group escapes the impact of a recession. The current downturn is the second in a decade for baby boomers, who have faced these major setbacks just as they are trying to square away their finances for retirement.
Losing a job and financial independence as a young adult also has long-term consequences. … Learn More
September 1, 2020
Economic Opportunity Reduces Disability
Add upward mobility – an individual’s success in surpassing parents’ economic circumstances – to the factors that can keep federal disability payments in check.
A substantial body of academic research has already established that when the economy is growing, unemployed and marginally employed people have better luck on the job market, and their applications for disability insurance start to decline.
But booms and busts aren’t the only influence on disability. A new study finds that economic conditions of a different type – the ability of low-income people to move up the economic ladder – can reduce disability by improving their health. People who earn more money tend to be healthier for a variety of reasons, ranging from access to better medical care to the lower rates of depression and obesity that exist in higher-income populations.
In a recent study, Yale University sociologist Rourke O’Brien used the data from another researcher’s study that mined IRS tax records to find people born in the 1980s to parents whose incomes were at the lower end – the 25th percentile – of the U.S. income distribution. The children were followed into adulthood to see if they earn more or less than their parents did.
It’s very difficult for children in low-income families to improve on their parent’s circumstances, but the odds are better if they grow up in areas with better schools, less inequality, and more two-parent families.
O’Brien’s research found that counties in which young adults earn more, on average, than their parents were less likely to one day report having a disability in U.S. Census surveys and less likely to be receiving disability benefits.
In a more in-depth analysis, the researcher found some evidence that upward mobility also blunts the well-known tendency of rising unemployment to increase disability applications.
Taken together, the findings indicate that whether someone ends up on disability benefits depends, at least in part, on where they grew up. …Learn More
May 7, 2020
Parents Cut Back Aid to Kids in Downturn
When the economy tips into a recession, as it is doing in reaction to the COVID-19 pandemic, the question of whether parents will give financial help to their adult children could conceivably go either way.
Parents looking for some peace of mind might throw a financial lifeline to their struggling or unemployed offspring. Or parents who’ve been providing some support might pull back.
One study of how parents in the United States and Germany handled this dilemma found that they retrenched in both countries during the Great Recession.
Parents are often an important source of support for their adult children. But between 2005 and the peak of the recession in 2009, the share of U.S. parents providing financial or in-kind support fell from 38 percent to 35 percent.
Germans are less likely to help their children in the first place, and they pulled back even more over the four-year period, from 24 percent to 10 percent of the parents, according to the 2017 study, which was funded by the U.S. Social Security Administration.
By 2011, the two countries had started to diverge: the Germans were stepping up their support again, while Americans continued to pull back. One obvious reason German parents snapped back earlier was that their economy recovered more quickly. …Learn More
December 24, 2019
Next Tuesday – New Year’s Eve – we’ll return with a list of some of our readers’ favorite blogs of 2019. Our regular featured articles will resume Thursday, Jan. 2.
Thank you for reading and posting comments on our retirement and personal finance blog. We hope you’ll continue to be involved in the new year. …
December 5, 2019
College Graduates Cope with Money
College upperclassmen and recent graduates have a lot on their minds. One thing they don’t always like to think too hard about is money.
But Maggie Germano, a financial coach, encourages them to get things out in the open and talk about it. At a recent personal finance session here at Boston College, she answered students’ questions about their credit ratings, student loans, and how to avoid spending money they do not have.
Here are the five best tips from Germano, a 2009 graduate of the State University of New York in Fredonia. She now lives in Washington D.C.
Pay attention. The first step to getting control of one’s finances is to pay attention to them, she said. Not dealing with credit card bills and student loan statements doesn’t make the problems go away. “The opposite is true: the more you pay attention, the more in control you’ll be,” she said.
Get a credit rating – or fix it. The key is to have a credit card but use it judiciously. Germano advises young adults to get what’s known as a secured credit card with a low spending limit – say $500. Secured credit cards typically require users to put up a cash deposit. To slowly establish a sound credit history, spend no more than 30 percent of the card’s limit and pay it off at the end of each month.
Student loans are hard work. Germano said that, after she graduated, her rent and student loan payments equaled all of her income. She signed up for the federal government’s income-based repayment program. In this program, the government reduces the payments to reflect the low incomes many recent graduates are earning at the start of their careers. Germano said she paid off her $26,000 loan balance off about four years ago.
The secret to not overspending. She learned this trick from a client. Set up two separate checking accounts. One account is for paying monthly bills – rent, Netflix, electricity – and the payments are deducted automatically. For all other spending, use a second account with a debit card and “don’t touch” the money in the first account. Using a debit card for discretionary expenses makes it easy to keep track of how much is left to spend each month – maybe it’s better to walk than take another Uber.
“It’s very human to want new things, be social, and spend money you’ve never had before,” she said. So put “systems into place that will prevent [that] from getting out of control.” …Learn More
October 3, 2019
The Secret to Feeling Younger
You’re as young as you feel!
This cliché is meant to be uplifting to older people. But it really just begs the question: what, exactly, is it that makes a person feel young?
Having a sense of control over the events in one’s life is the answer that emerged from a 2019 study of 60- to 90-year-olds in the Journal of Gerontology. “[B]elieving that your daily efforts can result in desired outcomes” lines up nicely with what the researchers call “a younger subjective age.”
This makes a lot of sense. Feeling in control becomes important as we age, because it counteracts our growing vulnerabilities – we can’t move as fast, hear as well, or remember as much. Wresting back some control can rejuvenate older people, instill optimism, and improve memory and even longevity, various studies have found. …Learn More
September 19, 2019
Many Demands on Middle Class Paychecks
Ask middle-class Americans how they’re doing, and you’ll often get the same answer: there are still too many demands on my paycheck.
Several recent surveys reach this conclusion, even though wages have been rising consistently at a time of low inflation.
Student loans trump 401(k)s. Two top financial priorities are in conflict: student loan payments, which people described as a “burden,” and saving for retirement, which they viewed as “important” in a TIAA-MIT AgeLab survey.
The debt seems to be winning: three out of four adults paying off student loans say they would like to increase how much they save for retirement but can’t do it until their loans are paid off – and that can take years. One woman described her loans as “draining” her finances.
A promising sign on the horizon is that some employers are finding creative ways to help employees pay down college debt, giving them more leeway to save money in their 401(k)s. But these efforts impact a small number of workers, and the amount of debt continues to rise year after year for every age group, from new graduates to baby boomers who helped send their children and grandchildren to college, a Prudential study found.
Buying a house isn’t an option. The good news is that about half of Millennials already own a home. Most of the others want to buy a house but can’t afford it, 20- and 30-somethings told LendEdu in a survey. Their top reasons were student loan and credit card payments and a lack of savings, which is the flip side of having too much debt.
Millennials are also putting off other goals until they get a house – marriage, children, even pets. “It’s quite obvious that this uphill battle” and debt “is having secondary effects,” said LendEdu’s Michael Brown.
Medical debt looms large. Americans borrowed $88 billion last year to pay their hospital, doctor, and lab bills. That debt fell hardest on the 3 million people who owe more than $10,000, according to an estimate by the Gallup polling company and a group of healthcare non-profits. …Learn More