The real problem in the economy crisis...

Last night on The Suze Orman Show, Suze outlined the real economic crisis (although a problem) is NOT the subprime housing and credit debacle. The real crisis hits closer to home. She stated that more and more 25 - 30 year olds are bailing out their parents who are flat broke or who have made poor financial decisions. She had two callers who were worried about the poor decisions that their parents had made. One 25 year old male was supporting his mother by co-signing on a mortgage and sending her money for the payments. The mother, unfortunately, was using the money for other things, and the mortgage payments were in arrears. Because he co-signed the loan, his credit score was now 416. Her comment back? Never, never, never, never co-sign for anyone else, including your mother. He will have to directly pay the mortgage company, or sell the house. . .(the kicker on this is that he is renting, and she owns....even though he is paying for it).

The other caller was a women in her early 30s. Her father passed away 13 years ago and her mother remarried. (a loser, who doesn't work) Her mother used up all of her 401K savings in two to three years (she is only 62) and only has $1,050.00 a month in social security for the rest of her life. How can she save some more $$$?? Not an easy answer, but Suze suggested she is "young" and needs to go back to work. (I wanted to know about what to do with the bum the mother is living with?)

Wow. I feel lucky that my parents (I think) are in okay financial shape. My father has a pension, my grandmother is still alive (in a nursing home, but with substantial $$) and my parents own two properties. Both are worth about $450,000 (together) and are paid in full. Barring any health problems (i.e. needing nursing home facilities), they are in pretty decent shape. I can't image feeling the squeeze between helping them and helping my children PLUS saving for our own retirement. My siblings are financially strapped and would not be able to help them, so the obligation would most probably fall on me.

The other crisis, I believe, are grown children who are struggling financially and depending on their parents for assistance, sometimes moving back in, only with the added "bonus" of bringing their spouse and children. Grace, at Graceful Retirement is experiencing this very thing. Besides it being emotionally stressful, it is a true burden financially.

I hope to be raising independent children, who understand how to make money and manage it. My youngest two sit and watch Suze every Saturday night with me, and I believe they are "getting" it. My older daughters (22, 19) do not have credit cards, and hopefully will not need them. They are getting their "credit" through paying for their car insurance. My husband believes they "need" one to establish "credit", but I disagree. I believe they can establish credit with a cell phone account and car insurance.

Which brings me to Suze's other point: credit cards

I posted about this earlier, but credit card companies are now raising interest rates of the "responsible" credit card users. Because they know they can't get money from the "high risk" customers, they are socking the good payers, the ones who pay on time and never miss a payment, with very high interest rates. Suze said it is imperative that you make paying off your credit card a high priority.

Bottomline? Save, Save and Save. Find the money leaks, find the cash and stowe it. You just never know which end of your family you may need to help. And you certainly don't want to make Bank of America, American Express or Citibank your beneficiary.....