I started this post more than three years ago. My main argument was that today’s middle class (non-Boomer generation) could no longer aspire to a “typical” middle class life: Own a house, afford to help kids with college tuition, have a healthy retirement fund (maybe even a pension!) and take one ‘big’ vacation per year.
Due to increased cost of living, healthcare costs, wage stagnation and other factors, owning a house is simply out of reach for the middle class, especially in high cost of living areas. Renting is the new reality for the middle class, and I wanted to argue that this might not be a bad thing.
However, several years and big rent increases later, I no longer believe renting is a feasible longterm option for middle class families with school age kids. For many families, rent takes more than 30% of income. Yearly rent increases are the norm while pay increases are not.
Home ownership hasn’t gotten more affordable either.
Does this mean the middle class is completely screwed? Yes and no, and yes.
In urban areas, a common solution for middle income families is to buy or rent way outside the city center. You could be fortunate to work at a company that is located in the suburbs, too. For me and most of my dual-income friends, at least one spouse always ends up with a hellish, hour plus commute.
My spouse and I settled on another option in order to purchase a house without adding a long commute. We sacrificed our children’s future…. By this I mean we picked a neighborhood with a subpar school district, knowing we can’t afford private school.
We have a special needs child and school rankings do not take that into consideration. However, it is reasonable to assume that well-funded schools will have more resources for both regular and special needs kids.
We have not started a college fund and won’t be able help much with tuition. Our special needs kid will probably have to rely on the kindness of government and strangers…a scary thought. At this point, our priority is saving enough for retirement and paying off the mortgage (which we hope can be sold at some point to support our special needs kid).
From the blogs I read, our decision is NOT common among PF bloggers, who tend to have 529 accounts and prioritize school district when buying homes. However, this was one of the few areas we could afford to buy. Even renting in a better school district was out of our reach.
Don’t get me wrong. The area is safe. The majority of our neighbors are gainfully employed, quickly remove their trash cans from view, and keep their lawns immaculately green and trim. We have a quiet life and can still take part in all that a major city has to offer.
I tell myself that I went to so-so schools and turned out okay. Even if we could pay for college, wealthier families have already upped the game by supporting their progeny way beyond our reach anyway.
Upper middle class parents can fund science camps and a wide array of extacurricular activities and pay for college tuition, enabling their kids to focus on studies and unpaid or low paid internships if needed to get a foor in the door.
Wealthier families can easily support their kids through grad school (which in case you haven’t heard is the new B.A) or even bribe their way to top tier universities. Their kids are graduates, they can connect them to resume-building internships, anything to give their kid an advantage.
I guess we will have to see how our choice affects our kids’ future.