Marketplace Money: Boomerang Generation

Marketplace Money  |  March 25, 2011

As Tess Vigeland reports, for those in their 20’s there are a lot of financial firsts: first paycheck, first apartment, first bills. And as the student loan debt passes $1 trillion, many people in their 20’s will add first student loan payment to that list.

An increasing number of young adults are struggling to make ends meet, and as a result many find themselves moving back home to live with their parents. This can present a host of new challenges–for parents and children alike. Those that find themselves in this situation absolutely need a plan to make sure they are actively pursuing financial independence.

From the article:

McNair is part of what’s being called the “Boomerang Generation.” They’re saddled with huge student loans and a lousy job market. But what’s most curious is that they don’t seem to mind.

That’s something McNair’s mother, Margaret, has a tough time understanding.

Margaret: It seems as though they’re afraid and that’s a big change. You know, when I was in my 20s, I could not wait to get out there. I still think that every now and then, I could use a reality check when someone tells me that they can’t find a job.

For now, back in grad school, Courtney’s loans are deferred. But when she’s done, all-told, she’ll have more than $50,000 worth to pay off. Problem is, according to PayScale.com, the starting salary for a special ed teacher is just $29,000-$40,000.

Lauren Lyons Cole: You don’t want to assume more student loan debt than what your salary will be when you graduate.

Lauren Lyons Cole is a 29-year-old certified financial planner in New York City. She says McNair’s student debt load is pretty typical for her generation. And like many 20-somethings, Courtney hasn’t done the math on what it’s going to take to be in good financial shape.

Cole: So many young people don’t understand that $40,000 a year, $50,000, even $60,000, it just really doesn’t go far. Nobody’s telling her that she has to go out and work on Wall Street or sell her soul. But the reality is that life is expensive.

Cole sas that McNair start by asking her father for a raise — advice she is choosing to ignore because she says it would be too awkward. But she might ask for a retirement fund contribution.

McNair is also among the many, many young people who leave school without learning how to manage money.

Courtney: I’ve always hated money. Don’t like it. I’m scared of it.

Vigeland: Why?

Courtney: I don’t know! I think it was because when I was little, my grandma, who we lived with for a little bit before she passed away, she was horrible with money. She would blow through it at the end of the month. she had no money. No money!

So Cole’s advice is as simple as it gets: Make a budget. She reviewed Courtney’s finances and found she has about $200 left after paying all her expenses each month. She said $80 of that should go directly into a savings account. The rest, to a weekly allowance for herself.

Cole: Take that $30 at the beginning of the week, put it in your wallet, when it’s gone at the end of the week, it’s gone.

Once she has that habit down, Cole says, she needs to dream big. Think about how she wants her future to play out, and how she’s going to fund that future. It’s a future McNair isn’t exactly rushing toward.

Courtney: I figure if I’m 30 and living at home, there’s something wrong.

But now at least, she has some tools to start a financial journey.

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