Unemployment is the biggest risk families face during a recession, but it isn’t the only risk. Unfortunately, the effects on families during a recession often go unnoticed because the media focuses on unemployment. Understanding how families are affected can help you determine how to protect yourself best. Here are the largest issues most families face when dealing with a recession.
Family and Lifestyle Changes
Families must change their lifestyles drastically during a recession, especially if one parent loses their job. Kids may have to stop activities, there’s less money for entertainment, and food options may change. Some families even have to sell their homes and move schools. To alleviate the stress on your family, come up with solutions to save money on frivolous things so you can stay in your family home. If staying in your home isn’t possible, consider staying with other family members or friends nearby so the kids can stay in the school they know.
Home Values Fall
Many people don’t realize how much families lose in a recession. When home values fall, it’s like watching your retirement plan go down the drain. The key is to stick it out. If your home value drops, it will likely come back if you stay in it long-term. This means doing everything possible to keep your home during difficult financial times. Methods include refinancing, requesting a loan modification, or asking friends or family for help.
Increased Debt
Less income makes it harder to keep up with your bills, leading to more credit card debt. In addition, if you don’t have room on your credit cards, it could lead to late payments and even more financial trouble. To avoid increased debt, prioritize your debts in order of importance. For example, pay your shelter and transportation costs first. If there are credit card debts or other bills you can’t pay, contact your creditor immediately. They often have programs for families suffering during a recession, but you won’t know unless you ask.
Education Becomes Unaffordable
If you have a child in college and a recession hits, it could become much harder to pay for it. Fortunately, there are ways to make college more affordable. Always complete the FAFSA application that comes out on October 1st each year. This may provide access to grants and financial aid. Your student may also find work-study programs and scholarships that he is eligible to receive. If you have any college savings plans, use those funds as well. Your withdrawals are tax-free if you use the funds for eligible college expenses.
A recession isn’t easy on anyone, but you can get through it with the proper steps. The key is to focus on what’s important and put aside the ‘non-necessities’ for now. Remember, you won’t have to sacrifice forever, but for now, you’re saving what’s most important to you as you and your family get through the difficult time.