In 1665, there was a massive outbreak of disease in England that killed almost 100,000 people, up to a fifth of London’s population. People sought to avoid infection through sniffing flowers, smoking, killing cats, and praying for neighbors that were suspected of sinning against God. Only later did they begin to realize that nobody was immune. This tragic event is symbolic of what is occurring in America. We now understand that no one is immune to the credit crisis triggered in August 2007.
This time of the year marks the start of a new college year. Enrollment at our colleges and universities skyrocketed the last decade due to the maturing of 80 million echo boomers, a generation of young adults that were born in 1980-1994. Members of this generation are encouraged to attend college by parents and their own desire for a highly paid career. Robust stock portfolios and a multitude of banks available to finance Junior’s four years of education helped colleges to consistently achieve double-digit growth.
Now, many parents are staring at investment accounts that have been ravaged by an equity market in “bear” territory, stock markets declined over 20% since the highs reached in October 2007. The declines in the value of homes and stocks have caused Americans’ net worth to fall $1.7 Trillion, the biggest drop since 2002. Incoming students are tackling tuition costs that are rising at an unprecedented pace. In the past, students turned to private loans when enrolling into college and this allowed rising costs to be easily absorbed. Banks are dealing with multiple challenges and are making internal changes to deal with new realities. In fact, Bank of America and Wachovia have exited the private student loan business.
Many parents will find it more difficult this year to finance their child’s education at a four-year university, so the epidemic in our economy should encourage parents to help young adults rediscover the network of community colleges in their region. These institutions provide an affordable way for students to receive career education and prepare to attend a four-year university. In addition, young adults planning to attend out-of-state universities might want to reconsider. The stock of collegiate assets in NC is unsurpassed and provides in-state students a high quality education at an affordable cost. Why travel to MIT when NC State is only an hour away? We often believe that where you attend college will define your success. We create our successes and failures through choices and personal behavior. The college we attended only provided the necessary tools to help achieve goals.
Open conversation with young adults about the current state of the family’s financial health will provide transparency and help with decision-making. I am convinced our youth will make better choices when they understand the impact of those decisions. For most parents, they find it hard to have these conversations, but it is the refusal to discuss money that locks us in a financial prison. Having the courage to engage in uncomfortable conversations will aid in personal development, educate youth about financial concepts, and allow families to make proactive choices.
