Parents can'tor won'ttake on children's education debt

BCEagle91 · June 5, 2008, 8:33pm

“in 1991 I was making less than 15K. I didn’t break 40K until 2000,
finally got to 60K in 2006. Not much room for saving 1K a month on
that income. Yet I still saved about 60K. No, I don’t have a college
degree. And I will happily spend my life savings making sure my son
gets his.”

What about your spouse?

“Isn’t the US savings rate at something like a negative percentage???”

Do those numbers include pensions and 401Ks?

At any rate, your neighbor may be borrowing to fuel his Hummer but
it doesn’t mean that you have to.

“today was triple coupon day at the market, yippee!”

CountingDown · June 5, 2008, 9:42pm

Back in the dark ages when DH and I were newlyweds, DH decided he wanted to go back for grad school. Between the two of us, we were making $40K. In eighteen months, we paid off $3000 in student loans, two car notes totaling $6,000 (my Chevette payment was $88/mo.!) and put $12,000 in the bank. Those were the days!!!

But seriously, we have no car loans (and have a policy never to have more than one loan at a time) – and have never had a $500/mo. payment. We put away about 11% towards retirement, not counting matching funds (another 6%). (We have been catching up for the years where DH wasn’t covered by a pension plan.) Also have regular monthly deductions made directly to a mutual fund account, and whatever medical/spending account/rebates we get go straight into savings. Having money taken out automatically makes saving pretty painless. Bought our house in 1998, paid less than 2x salary for it, have a 5.75% 15-year fixed rate and have not pulled out any equity.

We don’t have as much cash as we’d like for college because I had to leave work due to health issues. However, the risk-averse approach we started 25 years ago has kept us from financial disaster due to the loss of my income. We feel very fortunate.

barrons · June 5, 2008, 10:15pm

The vast majority of homeowners–not speculators, bought them well before 2005 and have not plans of selling now into the slump. Also much of the slumping prices are in the fringe suburbs far from the CBD. Homes in desirable close-in neighborhoods have been far less impacted–even in towns where prices are down significantly. The gas prices will make this even more important. So if LA is down 15% overall, Santa Monica might be off only 5% as they never could overbuild new homes there. Regional averages are not very good indicators of housing markets in large cities.
The excess inventory in most cities will be gone in a year or so and then prices will resume a slow steady climb as we come out of the slowdown loaded with BO optimism about change.

I guess I’m one who actually likes driving a nice newer car and going on nice vacations, eating at nice restaurants, etc. Money is for spending and enjoying. So is life.

BCEagle91 · June 5, 2008, 10:55pm

“The vast majority of homeowners–not speculators, bought them well
before 2005 and have not plans of selling now into the slump.” Also
much of the slumping prices are in the fringe suburbs far from the
CBD. Homes in desirable close-in neighborhoods have been far less
impacted–even in towns where prices are down significantly. The gas
prices will make this even more important. So if LA is down 15%
overall, Santa Monica might be off only 5% as they never could
overbuild new homes there. Regional averages are not very good
indicators of housing markets in large cities. The excess inventory
in most cities will be gone in a year or so and then prices will
resume a slow steady climb as we come out of the slowdown loaded with
BO optimism about change."

Real Estate dropped about 50% in the housing bubble burst in the
late 1980s to early 1990s in our area (Northern New England). The
Fed had cranked up interest rates to kill inflation and kill it
they did. It encouraged savings but did an incredible amount of
damage to the housing market. And the memories of that housing
bust is why prices in our area didn’t go up as much as in many
other parts of the country.

A friend of mine is a banker for the wealthy in Southern California.
Lately he’s been posting the Bank Death Watch. You can see today’s
post at [ClearStation</a> : Member Discussion : _COMPX](<a href=“http://clearstation.etrade.com/cgi-bin/bbs?post_id=8700416]ClearStation”>http://clearstation.etrade.com/cgi-bin/bbs?post_id=8700416)
I recall buying a thousand shares of New Century Financial on his
suggestion. They were about $31 at the time with earnings the next
day. I didn’t like the chart action the next morning and dumped it.

After the close, they reported dreadful results and warned. I think
that they were bankrupt in about a month. I think that my friend
took about a 25% haircut. You win a few, you lose a few.

Perhaps you can ask an unemployed Bear Stearns former employer what
he thinks of the houusing market. Or the shareholders of PMI Group
what it feels like to lose 94% of their investment. Or Etrade
Financial that has a great brokerage business but has seen their
stock price go from $28 to $4 in a year because of their mortgage
unit.

From Doug Noland’s Credit Bubble Bulletin:

May 27 - Wall Street Journal (Sudeep Reddy): “Home prices are falling
at an accelerating pace, new data show, while a separate report found
a shrinking share of Americans plan to buy a home anytime soon,
suggesting more price declines in the months to come. The
S&P/Case-Shiller index for the first quarter showed prices for
existing homes nationwide declined 14.1% from a year earlier, compared
with a year-to-year drop of 8.9% in the fourth quarter. A separate S&P
index that tracks 20 major metropolitan areas on a monthly basis
showed home prices dropped 14.4% in March from a year earlier and 2.2%
from February.”

May 27 - Bloomberg (Kathleen M. Howley and Dan Levy): "Housing demand
in California, where one out of every eight U.S. residents lives, is
reviving as bargain hunters buy foreclosed properties… Sales in the
state increased 2.5% in April, following 30 consecutive declines… The
median home price tumbled 32% in April from a year earlier to
$403,870, the biggest drop in at least three decades… About 30,000
foreclosed homes have been auctioned in California so far this year…
Banks holding repossessed properties are so eager to unload them
they’ll give buyers discounts of as much as 40%, said Celia Chen, an
economist at Moody’s…”

May 27 – Bloomberg (Robert Tuttle): “The average pump price of diesel
in California rose above $5 a gallon for the first time… The price
rose 29 cents to $5.027 a gallon…”

May 30 – Bloomberg (Josh P. Hamilton and Bob Ivry): “Newly delinquent
mortgage borrowers outnumbered people who caught up on their overdue
payments by two to one last month… In April, 73,880 homeowners with
privately insured mortgages fell more than 60 days late on payments,
compared with 39,584 who got back on track, a report… from the…
Mortgage Insurance Companies of America said… Foreclosure filings
surged 65% and bank seizures more than doubled in April compared with
a year earlier…”

May 27 – Bloomberg (Lindsey Arent): “In the midst of the worst surge
in mortgage defaults in seven decades, foreclosures in U.S. towns
where soldiers live are increasing at a pace almost four times the
national average, according to data compiled by research firm
RealtyTrac Inc….”

May 29 – Bloomberg (Vivien Lou Chen): “Federal Reserve Bank of Dallas
President Richard Fisher said he expects the central bank would raise
the benchmark U.S. interest rate should the public begin to expect
greater gains in consumer prices. ‘If inflationary developments and,
more important, inflation expectations continue to worsen, I would
expect a change of course in monetary policy to occur sooner rather
than later, even in the face of an anemic’ economy, Fisher said… ‘I
don’t know a single person on the committee that isn’t concerned about
inflation… The question is, ‘what is the right treatment?’ That is
subject to debate.’”

May 27 – Wall Street Journal (Michael R. Crittenden): “Turmoil in the
housing market continued to hurt the U.S. thrift industry during the
first quarter, as institutions set aside a record amount to cover
expected loan losses. The Office of Thrift Supervision said thrifts
lost $617 million during the first three months of 2008, down from net
income of $3.61 billion in the first quarter of 2007 but better than
the record loss of $8.75 billion in the final quarter of 2007. The
agency said thrifts set aside an industry-record $7.6 billion in
loan-loss provisions during the first quarter, up from $5.5 billion in
the previous quarter and $3.5 billion in the third quarter of 2007.”

May 24 – Financial Times (Gillian Tett): “Is something nasty lurking
in the leveraged loan woodshed? That is a question a lot of investors
are asking these days. As summer approaches, there are mounting signs
that banks are slowly working through the subprime horrors. For
example, last week Fitch, the rating agency, suggested that banks
could have written off about 80% of their likely subprime hits. But
now some investors are starting to wonder if the banks could soon be
hit by a new wave of problems, this time from the leveraged loan
world. This sector has also seen a dramatic surge of lending in recent
years, with a commensurate fall in lending standards. Thus, as the
economy slows, the risk is that private equity players could soon
start defaulting, creating more bad debt. Is this a real risk in the
second half of this year?”

“I guess I’m one who actually likes driving a nice newer car and going
on nice vacations, eating at nice restaurants, etc. Money is for
spending and enjoying. So is life.”

I suppose that some prefer cake while times are difficult for others.

munchkin · June 5, 2008, 11:04pm

BCEagle91: You sound as if you are doing a good job of training your kids in finances. I have been trying to educate my kids financially forever but not succeeding, even though the d is studying economics. I just came back from an investment presentation, maybe I should take her along next time. At least the food was good and the club fancy, lol.

We never did make much money but managed to save up quite a bit for the children’s education, we got lucky with investments. My hus graduated with no debt because his parents paid for all and I had minimal debt because I worked and worked. We want to do the same for our children.

In the beginning, we amassed our wealth by penny pinching and forced saving. Our cars were cheap, we took the bus if we can, and lived far beneath our means. The first $100,000 took forever to save. After that things became easier. Money beget money.

barrons · June 5, 2008, 11:09pm

The Seattle and Portland markets have seen nothing like the overspeculation of California. Same for my little get away town of Lynchburg. Our prices have flattened overall but good areas are still in demand. Looking at gross data for a state is like looking at the overall index for stocks. Within that are 40 winners and 60 losers. And where are most of those foreclosures–way out in crappy areas far east of LA, Merced, Stockton, and other armpits where more speculators than real buyers were active. Same for Las Vegas where most of the bad loans were to specs buying houses out in new fringe subdivisions.
And investing is no sure thing. I remember a couple of major corrections in the last two decades. Dotcom Bust ring any bells?

My spending keeps some waiter in his apartment, keeps the hotels open, and the airlines flying. You want a real collapse have people stop doing that. Then all those stocks you have been saving all those years will be as worthless as a new home in Merced.

Plus better times are already on the way

munchkin · June 5, 2008, 11:17pm

I just went to a dinner and talked to some people who said there are real estate buying tours to Arizona. There are multiple offers on some foreclosure in Stockton. There are people with money out there, waiting to invest.

I am thinking of getting something in Cali myself. Maybe the kids can stand to use the residency status for grad school.

barrons · June 5, 2008, 11:19pm

Now is the RE buying opportunity of the decade. Stockton, maybe but well located homes in growing areas, for sure. The smart money is rushing to the bargains.

sueinphilly · June 6, 2008, 6:37am

<<what about=“” your=“” spouse=“”>></what>

Never married. never got a dime of child support. My son has never met his father. His last words to me were “oh, so you’re keeping the baby??”

I am the poster child for frugal.

the people that are broke today surely have little to no retirement savings (?)

Dad_II · June 6, 2008, 8:30am

I like it, now that the discussion is turning into my favorite topic - frugal life style. If there is an olympics for being frugal, I think our family could probably win an event or two.

We are a typical low to middle class family and we save every 1/2 penny whereever and whenever we could. We have a relatively small mortgage ~ 1/4 of monthly take home. We purchased used cars with cash so not car payments. We used only creditcards that give cashback rewards.

Yep, we may have some saving, but we got there purely by living way below our means. I guess FA officers saw the life style from our income to saving ratio. Everyone I have talked to increased the grant to our DD.

Going back to the original topic. I went to a “teachers’” university in China and government took care of all my expenses. After working 3.5 years as a teacher, I came to US for my Ph.D. degree with $200 in my pocket. So, net- net, my parents actually made money from me because I gave them back everything I made during those 3.5 years

BCEagle91 · June 6, 2008, 8:51am

“I have been trying to educate my kids financially forever but not
succeeding, even though the d is studying economics.”

Kids like to do what they want to do and there is the fear factor.
What helps is in the doing. One of my things to do this summer is
to spend more time with them on actual trading. I can’t do that
right now as the younger one is taking summer courses.

“In the beginning, we amassed our wealth by penny pinching and forced
saving. Our cars were cheap, we took the bus if we can, and lived far
beneath our means. The first $100,000 took forever to save. After that
things became easier. Money beget money.”

The effect of compounding is amazing. I think that those eager to go
into debt don’t understand that because it works the same in reverse.

“The Seattle and Portland markets have seen nothing like the
overspeculation of California. Same for my little get away town of
Lynchburg. Our prices have flattened overall but good areas are still
in demand. Looking at gross data for a state is like looking at the
overall index for stocks. Within that are 40 winners and 60
losers. And where are most of those foreclosures–way out in crappy
areas far east of LA, Merced, Stockton, and other armpits where more
speculators than real buyers were active. Same for Las Vegas where
most of the bad loans were to specs buying houses out in new fringe
subdivisions.”

California and Florida certainly led the way. Loaning out money for a
$750K house on a $70K income didn’t seem like a good idea to me but
mortgage brokers didn’t think that it was a problem when investors,
bond insurers and others were on the hook for it.

“And investing is no sure thing. I remember a couple of major
corrections in the last two decades. Dotcom Bust ring any bells?”

I was fully invested in tech stocks in the 1990s. And I got out in
2000 and then went short in 2001. Bob Brinker called the top in
early 2000 and the bottom in Fall, 2003.

“My spending keeps some waiter in his apartment, keeps the hotels open,
and the airlines flying. You want a real collapse have people stop
doing that.”

Economic excess leads to misallocations of capital. Recessions result
in more efficient reallocations of capital. Witness United’s latest
move in dumping the use of their fuel-inefficient aircraft.

“Then all those stocks you have been saving all those years will be as
worthless as a new home in Merced.”

There’s been a lot of financial innovation and it’s easier to buy
exchange-traded funds that go up as markets go down than ever before.
In the past, there were a few mutual funds that shorted stocks or
bought put options but they were a pain to trade because you could
only make transactions that executed at the end of the day. Today
you can buy the QIDs which are the inverse double of the QQQQs. You
can buy SDS which is an inverse S&P 500. You can also go double long
the QQQQs via the QLDs.

“Plus better times are already on the way”

From CBS Marketwatch:

The nation’s nonfarm payrolls contract by 49,000, as jobless rate
surges in the biggest rise in unemployment since 1975.

Data deflate optimism
Stock futures turn lower on surprisingly large jump in unemployment
rate.

8:37Euro up 0.7% at $1.5685
8:37Dollar dips to 105.62 yen
8:36European shares fall back after U.S. jobs data
8:36[$DXY] Dollar slides as May jobless rate jumps to 5.5%

But then again I don’t subscribe to the notion that one day makes a
trend.

“Never married. never got a dime of child support. My son has never met
his father. His last words to me were “oh, so you’re keeping the
baby??””

It’s tough enough raising kids with two parents. I often think that
three or four would be a better number. I’ve had discussions on other
boards on the economic challenges that single-parent households face
compared to two-parent families. I grew up in a single-parent
household myself and didn’t have the guidance and resources available
that my peers in high-school and college had. Grants were more readily
available back then which made things a lot easier than they are now.

“Now is the RE buying opportunity of the decade. Stockton, maybe but
well located homes in growing areas, for sure. The smart money is
rushing to the bargains.”

One measure of value in housing is the rental inequality. Another is
affordability by median income. In trading terms, it’s called catching
a falling knife and the usual suggestion is to wear steel gloves. Real
Estate is always local so there are always deals out there, especially
if the local economy is supportive.

BCEagle91 · June 6, 2008, 9:02am

I almost forgot:

June 5 (Bloomberg) – Richmond Federal Reserve Bank President Jeffrey
Lacker, challenging Chairman Ben S. Bernanke’s unprecedented actions
to stem a financial panic, warned that lending to securities firms
raises the risk of future tumult.

AP: NEW YORK - The equity Americans have in their most important asset
— their homes — has dropped to its lowest level since the end of World
War II.

Homeowners’ portion of equity slipped to 46.2 percent in the first
quarter from a revised 47.5 percent in the previous quarter. That was
the fifth quarter in a row below the 50 percent mark, the Federal
Reserve said Thursday.

The total dollar value of equity also fell for the fourth straight
quarter to $9.12 trillion from $9.52 trillion in the fourth quarter,
while Americans’ total mortgage debt rose to $10.6 trillion from
$10.53 trillion.

LA Times: The net worth of U.S. households fell in the first quarter,
the second straight decline, thanks to the double-whammy of sliding
home values and the plunge in stock prices, the Federal Reserve said
in a report today.

The central bank’s so-called flow of funds report estimated the net
worth of American households at $55.97 trillion as of March 31, down
$1.7 trillion from year-end. That was more than three times the
$530-billion drop in the fourth quarter.

NY Times: About 1 in 11 American mortgages were past due or in
foreclosure at the end of March, according to a report released on
Thursday, a figure that is rising fast as home prices fall and the job
market weakens.

The first three months of 2008 marked the worst quarter for American
homeowners in nearly three decades, according to the report, issued by
the Mortgage Bankers Association. The rate of new foreclosures and
past-due payments surged to their highest level since 1979, when the
group first started collecting the data.

Economists worry that a big loss of jobs in the coming months could
drive default rates much higher. The Labor Department will release its
report on the job market for May on Friday.

WASHINGTON (AP) – The foreclosure hammer is hitting ever
harder. People lost their homes at the highest rate on record in the
first three months of the year, and late payments soared to a new
high, too – an alarming sign that the housing crisis and its damage
to the national economy may only get worse.

Slumping home values are being blamed in large part for the rising
tide of foreclosures. Troubled borrowers are left owing more to the
bank than their homes are worth. They can’t sell without taking a huge
financial hit, so they just walk away.

Financial Times - Countries failed on Thursday to agree fresh policies
to tackle the food crisis even as the declaration of the UN summit
warned of high food prices “in the years to come”.

The summit, hosted by the UN’s Food and Agriculture Organisation, was
called to tackle food price rises that have triggered riots in 30
countries, but became embroiled in a bitter dispute over biofuels and
export restrictions.

Agricultural commodities rose on the news as traders saw no prospect
of change in U-turn on biofuels policies in the US or in the use of
foodstuff’s trade restrictions by key exporters. Bad weather has also
contributed to Thursday’s price rise.

Boston Globe - Record numbers of Americans are raiding their
retirement savings as the economy has soured, threatening their
long-term financial security to make their mortgage payments, pay
medical bills, and cope with rising food and fuel costs. more stories
like this

Three decades ago, individually controlled retirement plans like
401(k)s barely existed. Most Americans counted on a pension, with
funds contributed and managed by their employer, to provide for
retirement along with Social Security payments. But today, workers
have accumulated $3 trillion in 401(k) accounts - up from $1.6
trillion in 2002 - making them a tempting target for households
looking to get through tough times.

The three largest administrators of 401(k)s - Fidelity Investments,
CitiStreet, and Vanguard Group Inc. - report a growing number of early
withdrawals from the plans in the past year as saving for retirement
has taken a backseat to mortgage payments, medical bills, and rising
food and fuel costs.

Washington Post - Even though lower interest rates have made many
adjustable-rate mortgages more affordable, foreclosures continue to
reach new heights as more than 1 million homeowners face losing their
home, according to industry figures released yesterday.

That’s because what began as a mortgage crisis focused largely on
subprime borrowers has spread and is being fed by the slowing economy
it helped create. Borrowers once considered the most creditworthy have
been hamstrung by declining home prices, making it difficult to
refinance their home to dodge a financial crunch.

Business Week - The chances of the U.S. economy falling into a
recession are 95 percent, an economist said at a real estate
conference Thursday.

Kenneth Rosen, a professor of real estate and urban economics at the
University of California-Berkeley, put the chances of a deep recession
at 45 percent and a mild one at 50 percent. He only sees a 5 percent
chance that the economy will quickly recover.

“We’re on very fragile ground. All we need is one more bad thing to
happen, another event to take place,” to send the economy into a deep
recession, Rosen said during a panel at the National Association of
Real Estate Investment Trust’s REIT Week investor forum in New York.

Seattle Times - As housing sales tanked last winter, local real-estate
pros waited anxiously for the traditional spring sales surge to revive
the troubled industry.

But May sales numbers, released Thursday, reveal that the urge has
been more of a sputter — at least around Central Puget Sound.

Home prices remain soft, inventory remains high and interest rates are
relatively low — all of which point to a buyer’s market. With interest
rates at their highest levels since mid-March and likely to go up, it
would seem that buyers would get off the fence.

WSJ - It finally happened. One of the major credit-rating firms
stripped bond insurers MBIA Inc. and Ambac Financial Group Inc. of
their vital triple-A ratings.

Thursday, Standard & Poor’s dropped the bond insurers’ ratings to
double-A and warned of further downgrades, just one day after Moody’s
Investors Service warned that it would likely knock down the ratings
of the two companies.

Financial Times - European banks have now suffered considerably more
losses because of the credit crunch than their US rivals, even though
the turmoil was first triggered by problems in the US subprime
mortgage market.

Of the $387bn in credit losses that global banks have reported since
the start of 2007, $200bn was suffered by European groups and $166bn
by US banks, according to data from the Institute of International
Finance, a Washington-based banking group.

barrons · June 6, 2008, 11:39am

The market for doom and gloom articles has been strong for over a year yet we are still not in the recession that 95% predicted had already happened. 
If you indeed got out of the tech market as you claim good for you. The majority of investors lost a large share of their equity as most people are not active managers and rely on market mutual funds. So telling people to invest in the market and assuming perfect market timing is horsecrap.

owlice · June 6, 2008, 11:59am

BCEagle posted:

That’s quite a nice income; certainly my household’s income is nowhere near that a month.

barrons posted:

Me, too.

I just did the math for my household; one paycheck, two adults, one high schooler, two cats, two 10-year-old cars, suburb of DC, paid less than $150K for the 1,875 SF house in 1992 from a very very motivated seller and got a great deal.

After deductions (life, medical, dental, vision, legal, car insurances, taxes, charity, and flexible spending account) and bills (housing, electric, phone, natural gas, water, phone; no cable, no car payments, no vacation funding), and saving (10% of our income, all in 401K, mutual fund, and 529), we have almost 15% of our monthly income left to spend on food, gasoline, commuting costs, clothing, entertainment, car and house maintenance, summer camp, books, other charitable giving, and so on. H, S and I all get small allowances, too, out of that almost 15% of my paycheck. Most of mine goes for gasoline and parking fees; I usually pack a lunch, though food in the cafeteria is inexpensive, to save money.

My employer offers a subsidy for mass transit, and though it takes me an hour longer each day (making my total commuting time 3 hours/day), most days I take advantage of this. (Parking at the subway is $4.25/day, however, and I still have to drive the 20 minutes to the parking lot.) I’d bicycle to the parking lot were it not that I don’t want to spend even more time commuting than I already do.

We have no “emergency fund” of cash sitting in a bank. It’s hard to know what else to trim. If we had an income of $10K/month, I’m sure we’d be able to save more money, too, but $1000K/month just for college savings? Very unlikely.

BCEagle91 · June 6, 2008, 12:04pm

“The market for doom and gloom articles has been strong for over a year
yet we are still not in the recession that 95% predicted had already
happened.”

It depends on your station and location in life. If you’ve lost your
house, your job, your business, your marriage and your credit, it’s
probably a lot more personal.

WASHINGTON (MarketWatch) – The U.S. unemployment rate jumped by half
a percentage point in May – to 5.5%, the highest since October 2004
– on the biggest increase in seasonally adjusted unemployment in 33
years, government data showed Friday.

It “looks a lot like a recession to us,” wrote Joseph Brusuelas, chief
economist for Merk Investments. Employment is one of the main
indicators used to judge whether the economy is growing or
contracting.

“If you indeed got out of the tech market as you claim good for
you. The majority of investors lost a large share of their equity as
most people are not active managers and rely on market mutual
funds.”

Bob Brinker runs one of the biggest financial talk shows in the US and
also provides a newsletter. His recommended positions are mainly in
mutual funds. He’s been fully invested since 1982 and went bearish
about five months before the tech crash started. He does not make
changes in his market directions very often. The last one was in 2003.

“So telling people to invest in the market and assuming perfect market
timing is horsecrap.”

My examples on returns in the 6% to 8% range are fairly conservative.
Certainly far less than what most people have expected as returns in
the 1990s and in the last few years.

Dad_II · June 6, 2008, 12:15pm

We do!!! Our income is not quite near $10,000/month before tax. By my math (new math - including company matching and cash pension plan), we save at least 4k/month. That even includes our DD’s college cost.

munchkin · June 6, 2008, 1:34pm

Do you have any house payments ? I find that once the house is paid for it’s much easier to save.

BCEagle91 · June 6, 2008, 2:19pm

“That’s quite a nice income; certainly my household’s income is nowhere
near that a month.”

“I just did the math for my household; one paycheck, two adults, one
high schooler, two cats, two 10-year-old cars, suburb of DC, paid less
than $150K for the 1,875 SF house in 1992 from a very very motivated
seller and got a great deal.”

We have a 1,200 sq ft home that we bought in the late 1980s for about
$100K. It was paid off in the 1990s. One 2000 car with two kids. In
our state, you can save a lot on taxes living in an inexpensive home.
There isn’t a general income tax but property taxes are high to
generate enough to run the state. Which means that living in a small
home can result in overall very low state tax rates. Of course our
state and several other New England states are experiencing problems
with job retention and growth given that there are other areas in the
country where living costs are far lower than they are here. I think
that there are benefits to living in New England as there are a lot of
very good school districts here but I do hear a lot of other people
talk about lower costs of living elsewhere, particularly in NC.

I understand that the DC area has a fairly high cost-of-living. But
clearly there are people that live on less than the upper and middle
classes.

“We have no “emergency fund” of cash sitting in a bank. It’s hard to
know what else to trim. If we had an income of $10K/month, I’m sure
we’d be able to save more money, too, but $1000K/month just for
college savings? Very unlikely.”

Perhaps we need something like this:

Unlike most countries in the world today, which finance their
social security systems on a pay-as-you-go basis, Singapore
requires people to save for their own retirement. The institution
through which the saving takes place is the Central Provident
Fund (CPF). While the accounts belong to the individual, monthly
deposits are paid both by employees and their employers. Currently,
the required contribution rate is 40 percent of wages, up to a
salary ceiling of S$6,000 per month (average annual earnings equal
S$30,038; S$1.40 = US$1.00). All compulsory savings, both at the
time of deposit and at the time of withdrawal, are tax exempt.
The funds are used to finance a wide range of programs and options
including allowing people to purchase homes, invest in stocks and
bonds and nonresidential property, pay for health care, purchase
life and disability insurance, finance a college education and
save for retirement. As a result of this system, about 85 percent
of the population live in homes they own - the highest home
ownership rate in the world. The high rates of contribution, along
with rising wages, have meant that the CPF system has been an
important contributor to Singapore’s savings rate - also the
highest in the world.

Depending on how CPF saving is defined, it equals between 16.3 and
30.4 percent of gross national saving.

Gross national saving, in turn, equals about 48 percent of GDP.

Members maintain three accounts with the Central Provident Fund -
Ordinary, Medisave and Special accounts. Among them, the total
contribution of 40 percent of income is credited as follows:

30 percentage points go to the Ordinary account, which can be used to
purchase a home, make certain investments, purchase certain types of
insurance and pay college education expenses.

6 percentage points go to the Medisave account for medical expenses.

4 percentage points go to the Special account for old age and
contingencies.

[url=<a href=“http://www.ncpa.org/studies/s198/s198.html]NCPA”>http://www.ncpa.org/studies/s198/s198.html]NCPA</a> - Study #198 - Compulsory Savings in Singapore: An Alternative to the Welfare State<a href=“1995”>/url</a>

barrons · June 6, 2008, 2:25pm

Madison – The Federal Reserve Board is done cutting interest rates for at least a while, the president of the Federal Reserve Board of St. Louis strongly hinted here Friday.

Speaking at a conference on housing at the University of Wisconsin-Madison, James Bullard said the aggressive cutting by the Fed since last August has stabilized the economy and that inflation is becoming a larger concern.

“Growth has indeed been slow, at least for the first half of 2008, but that cannot now be justification for further rate reductions,” he said. “Surprises to forecasts of economic activity, if any, have been to the upside.”

Bullard became president of the St. Louis Fed in March and as such sits on the Federal Reserve’s Open Market Committee, which sets short-term interest rates. However, he does not have a vote on the panel this year.

Bullard noted that the rate cutting so far, coupled with the ongoing program of direct fiscal stimulation through tax rebates, is just beginning to be felt in the economy. That, too, is a reason to be careful about additional rate cuts now, he said.

“My sense is that the U.S. economy will be able to post stronger growth in the second half of this year despite the ongoing financial crisis and the drag from the housing sector,” he said. “Such growth is likely to make the inflation outlook a more pressing concern for the Fed in the second half of this year.”

BCEagle91 · June 6, 2008, 2:45pm

Bernanke has been more hawkish for a while giving the impressions of starting a rate hike cycle. At the moment, the US Dollar is down 0.63, gold is up $20, silver is $0.31 and crude is at $136.97 (is that a record high?). So commodity traders apparently don’t believe in the rate hike story. Tech stocks, especially multinationals, have reported strong earnings. The question is can their strength overcome the weakness of the financials and companies dependent on the consumer? That’s the million dollar question and it’s probably responsible for a good amount of the volatility this year.

[MODERATOR"S NOTE: this thread has been closed because of repeated spam posts to the thread. The issue is still on-topic for further polite discussion within the Terms of Service in a new thread.]

Thread		Replies	Views
Should you pay for your child's college education? Parent Cafe	176	818	April 14, 2021
Should parents pay for college if they have the money? Parent Cafe	42	130	April 14, 2021
Do parents "OWE" their kids a college education? Parent Cafe	110	429	April 14, 2021
Do Parents Really Pay for College? Parent Cafe	212	1580	April 14, 2021
Whose responsibility is it to fund your child’s college education? Parent Cafe	103	502	April 14, 2021

Parents can'tor won'ttake on children's education debt

Related topics

CONNECT WITH US

Parents can'tor won'ttake on children's education debt