ARE THINGS LOOKING UP FOR STUDENT DEBT: NOPE

Generally, debt is down for the American consumer. Mortgage debt and credit card debt is being paid down – but student loan debt is not. It stands at roughly $1 trillion and rising.

Why? For starters, during the recession many people decided to return to or stay in school because job prospects were so lousy. People were hoping to wait out the recession and improve their chances of getting a job when it was over.

Student debt has also increased because of the rapid rise in the cost of college tuition, which is growing faster than inflation. Also, Mom and Dad may not be able to contribute as much as they had expected to, because they may be unemployed.

Some of the college debt burden is also falling on students’ parents and grandparents; almost 17% of outstanding past-due student loans are held by those over 50, and almost 5% by those over 60, according to an economist at Barclay’s Capital. This is the time parents and grandparents should be saving for their retirement, not worrying about college debt.

My advice? Remember, your offspring can borrow for college, you can’t borrow for retirement.

The Reinvented Wedding

Twenty-seven thousand dollars is a lot of money for a party even if it is the most important day of your lives.  According to theKnot.com and WeddingChannel.com, that's what the average wedding now costs.  Costs are even higher in the more expensive markets such as New York City and Chicago.  This is a good and sensible reason for the recent trend toward more homespun and creative wedding receptions.

In this sluggish economy more and more couples are turning to simpler, intimate and sometimes off-beat ways to celebrate.  According to Amy Kaneko, an events planner in San Francisco, “the backyard is the new ballroom.  “I think people are waking up to the insanity that is the wedding market” said Marin County, California caterer Stacy Scott.

Couples are opting for simple ceremonies followed by downsized receptions including picnics, barbecues or simply inviting only closest family and friends utilizing such venues as public parks, backyards or the living rooms of friends or family.

Another reason for the new trend is that marrying couples are now at record high ages. According to Brides Magazine, the average age of the bride is now 27 and the average age for the groom is now 29.  Couples are busy and have to do their planning in the midst of work and other pressing commitments.  These simpler festivities can take as little as two weeks planning and coordinating.  Often guests are asked to bring their own chairs and cushions.  Some couples have even gone the “covered dish” route asking friends to bring food and beverages.

Several years ago I worked with a couple to budget a wedding for a feature on Oprah.  We put together a complete Las Vegas  wedding for ten thousand dollars.  The key, as with most financial decisions is having a budget and sticking to it.

It is essential that the marrying couple and family [if they will be shouldering some of the cost] assess their finances, make a budget within their means and meticulously adhere to the plan. You must accurately assess all costs that will be involved and be honest and realistic about them.  Also include a category for unexpected costs.

Stay within your means and don't let your emotions get in the way of your financial health. If you can't afford an exorbitantly priced new designer gown, consider buying a gently used one or perhaps borrowing a gown from family or a friend.  You can always have the dress tailored to fit you which is far more cost effective than buying a new one.  If you are going to have your reception at a restaurant consult with the establishment to find a cheaper time of year or day of the week.  It's OK to break with tradition.

These are all great ideas even in better economic times.  Often the year of preparation and lavishness of the traditional wedding can overshadow the real meaning of the gathering.  These less formal, less frenetic celebrations make for a special day that everyone can enjoy and remember.

There's No Place Like Home

Traditionally, “fleeing the nest” has been a rite of passage for kids heading off to college.  Both children and parents look forward to the new life-stage.  Kids eagerly anticipate their freedom.  Parents dream of a clean, vacant extra room in the home.

According to a recent study from the largest student lender, Sallie Mae, this year more than half of the students surveyed lived at home while attending college.  This is up nearly 9 percent from just last year with most of the rise coming from families with over $100,000 in yearly income.

The study also noted that there has been a noticeable change in the way college is paid for overall.  Students are carrying a larger percentage of the cost, up 6 percent from four years ago. Parents are paying 7 percent less.

Along with choosing less expensive colleges, remaining in the family home has become another popular tool to help offset  the high cost of higher education.  Postponing the “fleeing of the nest” is not, however, without complications.

I discuss this topic in Money Still Doesn't Grow on Trees in a chapter on kids moving back home but it also applies to kids who don't leave.

Both parents and kids must have a set of rules.  These rules won't be the same ones that you used when your kids were minors and you were completely responsible for them but your kids are not your roommates.  Remember, it is still your house.

Two very important issues that you need to clarify up front are “who pays for what” and “my house, my rules”.  Be specific.  Negotiate a fair contract.  For example, you're probably not going to set up a curfew but you want to be notified if your kid isn't going to be home when expected.  On the other hand, you're not going to enter his or her room to gather dirty laundry from the floor. Coordinate on a reasonable budget to determine “who pays for what”.

Parents, forget those paint swatches and hold back on ordering that new treadmill.  That “extra” room might not be vacant for a few more years!

Teens and Cars: How Not to Drive Yourself Crazy

We all want things we can’t afford, and we basically know that there are various ways to handle the problem:

• We can do without it.
• We can save for it.
• We can find ways to increase our income.
• We can buy now and pay later on some sort of an installment plan that we can or can’t afford.

But what happens if we plan carefully in advance—save up, increase our income, or set up a plan to make payments we can afford—and suddenly we discover that we still can’t afford it?  This is a situation that your teen may easily find themselves in when it’s time to buy a car or pay their share of insurance on a family-owned vehicle. This comes from making plans based on too little information.

Give your teen this quiz before they start the auto-buying process:

1. What are all of the different costs associated with buying a car? How much are they? (Have your teen make a detailed list.)
2. What are all the different costs associated with operating a car? How much are they? (Encourage teens to go on-line to research the answers.)

It’s heart breaking when you’ve seen your teen work hard and save up what they think is enough for a car . . . when they drag you to their computer to show you the ad for that perfect vehicle . . . it's only $6,000.  “I’ve saved the money, so let’s go buy this…now!”

But we all know that your teen will need more than the $6,000. They will also need money for:

• Sales tax
• Registration
• Inspection
• Insurance
• Extras

The extra price tag on all these? That’s for your teen to research, with your coaching.  They may be shocked at the insurance quotes, which vary greatly from state-to-state and even within different regions or locations in each state—not to mention—gender.  For instance, in New Jersey, for a male driver, who is 18-years-old, the average insurance quote is $2,999 or $250 per month versus an 18-year-old female driver at $2,267 or $189 per month.  After your son stops grumbling about the fact that his insurance would be lower if he were a girl—turn this into a “teachable” moment and ask him to think about why a male’s insurance is higher!

Also, I include a trip to the insurance agent before turning over the keys. Since we are parents and most of what we say is heard by our ever-so-smart teens, as “Blah, blah, blah,” let your insurance agent explain liability, collision, personal injury coverage and the facts-of-life if your child is caught speeding or under the influence of drugs and alcohol.  The facts are “sobering” and are more impactful coming from a third party.

If your teen is going to drive the family car, let them research the cost of adding a teen to your insurance policy. I’m a firm believer that they need to pay the extra cost. Make sure this is also on the list of questions for your insurance agent visit. In many states, for instance, the insurance company can cancel your policy after one accident, or even one moving violation, by a teenage driver.

Also, let your teen find out what they can do to reduce the cost of the premiums. This varies from state to state and carrier to carrier, but here are some things that will generally make a considerable difference:

• Have your teen take and pass a driver-training course.
• If your teen is a good student, make sure their grade record is part of the insurance package you give to your carrier. Explain that insurance companies have found that good grades correlate with being more responsible and actuarial tables show that good students get into fewer accidents.
• Put limitations on how much your teen drives the family car—and which car they are allowed to drive. Premiums may be lower if they are driving the older or cheaper car. (Also, if your teen is only allowed to drive occasionally, premiums may be lower.

The next thing teens have to figure out is the ongoing cost of gas, maintenance, and emergencies and how they are going to pay for that. If they are using the car to do chores for you, it’s only fair if you help with the costs—if not, they may be shocked when they spend $50.00  to $100.00 for gas per week!


Stay tuned for my next blog post where I'll show you the “contract” I want you to create with your new driver.  Until then, Happy Motoring! (I know you have a lump in your throat—“Teens and driving” always causes that!)

From Helicopter Parents to Free-Range Parents

I grew up in the days of freedom. We rode our bikes to school and met with the neighborhood kids to play after school. We invented games or scavenger hunts and never seemed to be bored. We had to be home at dusk. Mom and Dad looked at our report cards when they arrived and if they got a call from the school …we were in trouble. We were supposed to do our homework, and we did. We were supposed to get good grades, and we did. Life was pretty simple.

Then, we grew up and had kids and the world seemed to get more dangerous (or were we just more aware of the dangers?) Kidnappings, pedophiles, predators praying on our kids. Mom and Dad both working so kids had to be entrusted to others. When parents were home, caring seemed to be shown by hovering. “Who are you playing with? What are you playing? What are you reading? Are you reading? What are you eating? Who are your teachers? Where is your homework? Let’s do it together. Let’s go to: soccer, football, cheerleading, yoga, ballet lessons, chess classes, tutoring, piano practice…(I’m getting nauseous).”

We went from free-range parents to helicopter parents. Ok, we try to balance work and home and kids and family and friends. If it isn’t scheduled, it can’t happen. We all want our kids to grow up to be healthy, self-sufficient, independent, creative kids who are in safe, supervised environments protected from the creeps that are lurking about. Are there areas in our child’s lives where we can give them some freedom so that they can learn to make choices on their own…and equally learn the consequences of those choices on their own? Yup! With money!

Kids today, if we allow them, can earn, save, spend and share money by being independent self-starters who can be empowered to make their own choices. You set down the rules. For instance, have your kids decide what they want to buy. For the younger ones, maybe a small toy, for older ones, it could be a video game or cell phone or iPad. (You must approve of their savings goal.) The challenge is that they have to earn the money to reach their goal. Either you can start them on an allowance doing regular chores – or pick odd jobs for them to do. [Hint: pay by the job, not by the hour.] They can dust, vacuum, weed, water plants, clean windows, sweep floors, brush dogs, stack recycling…let them come up with ideas. They can also earn money by using some of those skills they’ve learned, like teaching other younger kids to play the piano, or soccer, or chess, or do yoga.

Of course you will still supervise, but avoid hovering. If your kid earns the money - they get to buy the item - if they don’t earn the money – they don’t. It’s simple. You can use the same system for them to pick and donate to charity.

This earn and learn system will help balance the helicopter versus free-range parenting. The drawbacks of the helicopter parent is that you create a dependent child who doesn’t know how to be independent, because they were never allowed to be. The free-range parenting drawback is the safety issue that independence in a dangerous world can create.

Teens and Summer Jobs

Has your teen found a summer job yet, because it’s going to be hard to find one.  In fact, last year, only 1 in 4 teens had summer jobs, the lowest on record, and this summer may be just as tough.  

Half of all teens are in school over the summer doing remedial or prep work for college. The recession has also changed the landscape. Now, teens are competing with grandparents, who are also vying for the same summer jobs.

What should your teen do?  They should research companies that hire teens: camps, day care, retail stores, restaurants, tennis and swim clubs, libraries, parks, resorts—you get the picture.

Have your teen look into internships with corporations, who are interviewing now.  Also volunteer work is great.

Help your teen to create a simple resume and a cover letter.  Work with them to hone their interviewing skills. They should go prepared to each interview with a list of intelligent questions that demonstrate their knowledge of the job and why they are perfect the candidate.

They can search summer job opportunities online and also visit prospective employers in person.  They can also be creative and use their special talents by giving lessons to neighborhood kids.

The earlier they start, the more options they’ll have.

What Parents Need to Tell A Child About Their Own Finances: Where There’s a “Will”, There’s A Way!

In my mother’s day, and my grandmother’s time before that, a family discussion on the subject of sex or money was not considered “appropriate" dinner conversation. (Of course, that was also a time when family had dinner together!) Both were viewed by them to be intimate, private topics, and there is evidence to suggest that neither subject was discussed much even between husbands and wives!

Today, social morals have been relaxed (in some families) and sex is even a required topic of discussion within many families. The great life-threatening dangers that can come from imprudent or unprotected sex have forced most parents out of Victorian age restraints.

Oddly enough, the subject of money still has not been equally discussed, yet I contend that the imprudent or unprotected spending have their own serious consequences: over extension of credit, personal bankruptcy, and, at the extreme, homelessness, these are some of the unfortunate results that are on the rise.

Are you prepared to discuss your own finances with your child?  “Too personal”, or “none of their business?”  No parent cares to pass along information about him or herself that can be used to perhaps be embarrassing later on. (That’s why we discourage Mom from displaying those cute age-2 bathtub shots to our boyfriend!)

I don’t think Junior needs to know that you bounced seven checks in a day, or that you were denied a mortgage four times before getting approved. However, there is some financial information about yourself that an older child, and certainly a teen, does need to be aware of for their own benefit.

Start with your will.  You note I said your will.  If you have kids and you don’t have one – stop reading my blog and go to: www.nolo.com.  Make your will today with maximum ease and minimum cost using Nolo's Online Will.  Just log in, answer questions about yourself and your property, and print!  Or make your will with Quicken WillMaker Plus, software that comes with dozens of other useful documents such as Power of Attorney and Health Care Directive.  Not only does a will outline what happens to your financial assets and designate an executor (the person who sees that the instructions in a will are carried out), it also lays out (or should) what you want to happen with your children until they are old enough to be on their own.

It’s shocking to me to learn that despite the obvious importance of having a will, 55% of all Americans die without one.

I’m ok with you going onto sites to see what you want in your will – but I’m still a believer in getting a lawyer to actually draw one up. It’s not worth getting it wrong.

Some of the things to think about are:

1. Who do you trust to be the executor?
2. Who will get custody or guardianship of your kids?  By the way, make sure you have communicated your intentions to that person.  A surprise is not a good thing.
3. How will that child be provided for financially?  Have you made sure your guardian will also be provided for? Raising a child is expensive, you don’t want to burden that guardian.
4. How are your assets to be divided up?  Who gets what?  Remember, you need to review your will every 5 years or when something changes, like a new child, a death, divorce, etc.

The reason a discussion with your child about your will is so valuable is that it gives you the chance to assure your youngster that he or she will be taken care of if something happens to your spouse/partner. Don’t think that your 4 or 5 year old hasn’t thought of this. They are exposed to Bambi, Lion King, Cinderella – what happened to their parents? Hansel and Gretel still freaks me out!

Give your kids the assurances that are age appropriate, make sure they feel secure and don’t think they’ll end up in an orphanage begging for porridge.