has just turned 25 and will graduate next spring from her local university, with a major in journalism. She has been listening to her parents go on and on about how it was when they were growing up in the 1960s and 1970s. They tell her, “By the time we had reached the age of 25 we had already married and bought our first home.”
Cassie is beginning to feel like a failure for being so far behind. Like many young adults, she still lives at home with her parents, has $20,000 in student debt like so many students[1], has yet to land a full-time job, and is a long way from finding the person she wants to marry. Rather than get into an argument, Cassie decides to use her newly learned interviewing skills to get her parents to talk about the “good old days.” This way she will be able to compare their experiences as young adults to her own.
Here is what Cassie discovers. Her parents, Francesca and Cano, came from working-class backgrounds. Cassie’s grandparents did not have the resources to help fund their children’s postsecondary education and, at that time, student loans were a relatively new thing. Cano and Francesca were high school sweethearts.
Upon graduating from high school at the beginning of the 1980s, and with no hope of going to university, Cano, who wished he could become an architect, became a plumber apprentice instead. Becoming an architect would have meant many more years of school with no money to pay for his education. Francesca went to teachers’ college. Soon they were both working. Their employers provided benefits and pensions. Francesca and Cano may not love their work, but they are satisfied that their future offers financial security and they expect to retire at age 65 after 40 years of work.
A year after graduating from their programs, they had a big wedding. Cano and Francesca’s parents hosted the wedding, the bride’s parents paid for the reception, and the groom’s family provided a cash gift of $1,000. The bridal shower provided the needs of the home from kitchen to bed and bath. Cash was also a popular wedding gift. The wedding provided Cano and Francesca with most of their household needs and a total of $2,000 in cash.
Soon after the wedding, Cano and Francesca found a home. Using the $2,000 savings from their wedding and adding another $5,000 they managed to save on their own, they were able to qualify for a mortgage on their dream home, a semidetached dwelling in the suburbs.
Cassie and her parents feel good about their conversation. Francesca and Cano are sentimental and love talking about their life together. They are pleased Cassie is interested in understanding the sacrifices they made for the betterment of their family. Cassie now understands her parents sacrificed the education and the careers they would have preferred to enable them to marry and have a family, respectful of the social mores of the day.
Let’s compare the lives of Cassie and that of her parents at age 25:
• Cano and Francesca at age 25 are newly married and both have new careers, an apartment full of new furniture, no debt, and a nest egg of $7,000 to help them make their first home purchase.
• Cassie, at age 25, is living in the family basement and is starting her career with a $20,000 debt.
She compares her $20,000 debt at age 25 with how her parents began with $7,000 in savings at age 25. Cano and Francesca married in 1985 so Cassie adjusts their age 25 starting point for inflation. The $7,000[2] start is equivalent to $14,000 today! That represents a $34,000 difference in net worth at age 25.
Cassie has a good education in a field of her choosing. She has a promising future career which she expects will be personally fulfilling. Cassie and her peers have more choices, easy access to student loans, and credit cards.
Many young adults of today are better educated than their parents. Education takes time; this means that today’s young adult is entering the job market later in life and more often is graduating with student loans and credit card debt.
Today’s young adults are reluctant to accept a work environment in which they do not feel fulfilled. This is in stark contrast to their parents’ generation who made career and financial sacrifices in their early years in order to have an easier life later. This generation of young adults is less prepared to make sacrifices and save a portion of today’s income for a better life tomorrow. Is it any wonder today’s graduating students are reluctant to leave the family home? Similar to Cassie, today’s youth are starting from a negative position. Financial life planning for those born after 1985 will be dramatically different than it has been for earlier generations.
Sample 1 shows you a simplified chart of the differences between the Boomers and Generation Y.
Sample 1: Differences between the Baby Boomers and Generation Y
My question to you is: How can you take advantage of your unique situation and give yourself a quick start to the next decade? If you follow the steps outlined in the subsequent chapters, you will be off to a good start.
1. The Financial Consumer Agency of Canada, “Youth Financial Literacy Study,” www.fcac-acfc.gc.ca/eng/resources, (2008), accessed June 2011.
2. Bureau of Labor Statistics, “Consumer Price Index,” www.bls.gov/cpi, (2011), accessed June 2011
2
Give Your Parents the “Money Talk”
* Read this if you are a student and you want to know how much help you can expect from your parents.
* Read this if you have recently graduated and you want to live at home while looking for a job and/or starting your career.
Regardless of whether you are living in the family home or have already moved to a place on your own, I strongly recommend you have the “money talk” with your parents. Fashions and social mores may have changed, but what has not changed is parents’ love for their children and their desire to see them off to a good start as they begin life’s journey.
All parents have expectations for their children. Sometimes these expectations are heard loud and clear. At other times it seems like expectations are secret until one of you experiences disappointment with the other. It is best to have an open dialogue with your parents about the expectations you have of each other. During this dialogue you may find that your expectations of each other are similar or you may discover that your ideas do not coincide. That said, this is important information for each of you to know in advance.
The purpose of this conversation is to gain a clear understanding of what you can and should expect from your parents. While it is your parents’ responsibility to raise children to become self-sufficient adults, this does not mean giving in to your every wish. Thus, you must recognize your parents also need to be planning for their own retirement — unless of course you would prefer to support them in their old age! Be respectful and let your parents know how grateful you are to them for all the support they have given and are willing to provide you.
If you and your parents are able to have an open dialogue on these topics, I believe all of you will gain greater insight into the values which are important
