Americans increasingly tap savings for daily needs

06.10.09
By Lewis Green

These days families are less and less concerned with where to go for their next week-long vacation and paying more attention to how they will pay their upcoming credit card bill or college tuition due in the fall.

Job loss has slowed somewhat from numbers recorded in previous months - nonfarm payroll was declined by 345,000 in May - but some of those who are unemployed or worried about job security find themselves taking increasingly risky measures to cover current debt.

In fact, a recent survey by ING Direct suggests that parents are using money set aside for their kids' savings to pay daily expenses.

ING reports that 34 percent of parents are contributing less to savings accounts for their children than they were in the past and 18 percent that already have savings put away for their kids' future education are tapping that money for credit card payments and other household bills.

These types of actions could have detrimental effects on the financial habits of kids and their ability to afford college.

"It's clear that parents are struggling with their expenses during these difficult times, but tapping money put aside for their kids will only exacerbate a family's problems when it comes time to pay for college," said Arkadi Kuhlmann, president of ING Direct.

"Parents need to set an example by setting up an automatic savings plan. A 'set it and forget it' savings mentality makes it easy for parents to save, while teaching their children about the importance of putting some money aside for future needs," Kuhlmann added.

In addition to setting an example for their kids about saving and spending habits, ING found that 94 percent of parents surveyed feel ultimately responsible for teaching their children about personal finances, but many are unprepared to do so.

Until financial literacy and other money management tools are mandated in schools, parents will continue to play a key role in the financial rearing of their youngsters.

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College savings suffering in some American households