Part One | Chapter Two

       LESSON #2:

       THE FAIRYTALE IS OVER

      There are many reasons why the role of parents in a child’s life has taken on a new and critical dimension. Few would argue with the fact that times have changed… and that, today, change is a constant in our lives. In most cases, and in my opinion, most of us are not changing with the times. The financial advice we got from our parents is old and outdated—obsolete in today’s world.

      Making the Case

       The Fairytale Is Over

      Once upon a time, all a person had to do was go to school, get a job, work hard, and retire. Until a few years ago, the company you worked for took care of you when you retired… you received a paycheck and medical benefits for life. Today this is a fairytale.

      Once upon a time, all a person had to do was buy a house, and the house went up in value. Homeowners got rich in their sleep. Many people could sell their home, some even pocketing a small fortune to sustain them through retirement, downsize to a smaller house, and live happily ever after. Today this is a fairytale.

      Once upon a time, the United States was the richest country in the world. Today this is a fairytale.

      Once upon a time, the U.S. dollar was as good as gold. Today this is a fairytale.

      Once upon a time, all a person had to do was go to college and they were virtually assured of earning more money than those who did not graduate from college. Today this is a fairytale.

      In 2007, the subprime mortgage market collapsed, and the biggest financial disaster in history began. The fairytale is now a nightmare. And the nightmare is not over… yet.

      Out of fear, millions of parents continue to advise their children, “Go to school and get a college degree so you can get a high-paying job.” Panicked parents recite this mantra in spite of the fact that unemployment is high among young people, even those with college degrees. Many college graduates, unable to find work, go on to graduate school for advanced degrees. They then leave school even deeper in student-loan debt, still searching for that elusive high-paying job.

       Education Gets More Expensive

      As prices around the world collapsed, why did the cost of education go up?

       • In 2006, home prices in the United States averaged $230,000. By 2011, home prices had fallen 26 percent, to an average of $170,000.

       As home prices fell, the price of a college education rose by 4.6 percent between 2006 and 2007 to an average of $22,218.

       • On October 9, 2007, the Dow Jones Industrial Average hit an all-time high of 14,164. By March of 2009, the Dow had fallen over 50 percent to 6,469.

       As the stock market crashed between 2007 and 2008, college tuition rose by 5.9 percent to a new average of $23,712.

       • In July of 2008, oil hit a peak of $147 a barrel and crashed to about $40 a barrel before recovering.

       As oil prices were falling between 2008 and 2009, college tuition rose 6.2 percent to $25,177.

       In 2011, college loan debt surpassed credit card debt for the first time—over $1 trillion in the United States alone.

       Unforgivable Debt

      Today, thousands of highly educated students leave school strapped with student loans, the worst possible debt of all. Student loans are the worst form of debt because student loans can never be forgiven, or discharged. With most other types of debt, like a home mortgage or credit card debt, a person can declare bankruptcy and the loans are wiped out. That’s not the case with student loans. Even if a student dies, his or her parents are on the hook for repayment of the loan, if they were co-signers, as many are.

       The Clock Is Ticking

      Once a student graduates, the interest clock begins ticking and interest starts to accrue. Rather than get richer after leaving school, millions become poorer, going deeper in debt as interest on the original school loan starts to pile up.

      A student loan can negatively affect the student for life. A student loan can affect the home a student buys (if they can afford one), the quality of life for their family (if they can afford a family), and their hopes for a secure retirement (if they are able to retire).

      For many, a student loan will be the proverbial albatross around their neck… for life.

       What’s a College Education Worth?

      For the first time in history, people are questioning the value of a college education. A few will even say that the ROI (Return On Investment) of a college education is not worth the investment.

      Between 2006 and 2007, the median starting salary for college graduates in America was $30,000. Between 2009 and 2011 it had fallen to $27,000.

       The Unemployment Crisis

      Youth unemployment is an international crisis, a problem that has led to the “Arab Spring,” “Occupy Wall Street,” and other gatherings of unemployed youth.

      In 2012, as the Presidential campaign heated up, both political candidates promised to bring jobs back to America. How can that happen when American factory workers earn between $125 to $200 a day, once benefits are factored in? Many workers in low-wage countries earn just $2 a day.

       Future Shock

       For the first time in America, many believe their children will not do better financially than their parents.

      Even China is having problems with low-wage countries. It’s estimated that there are dozens of countries in which workers’ wages are even lower than those in China. You do not need to be a math professor to know that factories follow low-wage workers, and $2 a day is less than $200 a day.

      On November 5, 2012, Time magazine published this piece by Peter Gumbel:

       Why the U.S. Has a Worse Youth Unemployment Problem than Europe.

       The latest unemployment statistics released this week on both sides of the Atlantic show that the number of jobless is continuing to rise in Europe far above the rate in the U.S., and the picture is especially bleak for young Europeans under the age of 25. In the 27 E.U. nations as a whole, the youth unemployment rate rose to 22.8% in September, up from 21.7% the previous year. In Greece and Spain, that proportion is over 50%. In the U.S., meanwhile, the unemployment rate was essentially unchanged in October, at 7.9%, the Bureau of Labor Statistics announced Nov. 2. And the U.S. rate of unemployment among young people under 25 was 16%.

       But such statistics are rather misleading because they don’t tell the whole story. They don’t include the millions of youngsters who are not in the labor market because they are continuing with their education or are engaged in training programs. If you take those young people into account, the picture is still grim everywhere, but the U.S. actually comes off as having a worse youth unemployment problem than Europe.

      Education is becoming more important than ever. Our schools provide the important function of training skilled workers to support the economy. For example, schools train doctors, accountants, lawyers, engineers, teachers, social workers, mechanics, construction workers, cooks, police officers, and military personnel, who are all essential to