As a strong advocate for financial education of both children and adults, I was interested in a recent T. Rowe Price survey which discussed the type of job parents are currently doing with teaching their children about finances.
According to this new survey, parents are talking to their kids about shopping, but are skipping conversations about household budgets, savings and financial goals. Close to 75% of survey respondents say they regularly have conversations with their kids about money, but the focus is on spending—not the family’s current financial situation.
As parents we have a tendency to want to shelter our children from many adult issues, this includes money. But at the end of the day, money and financial responsibility is what can get our children into trouble if they don’t have good habits, and we as parents are responsible for this education.
While many parents in the survey think they strongly encourage their kids to talk about money, only 19% of children agree. In fact, close to one-quarter of child respondents say their parents discourage them from talking about money.
The survey shows children want to learn the financial basics with 34% citing wanting to know how banks and credit cards work, 29% would like to learn about managing money and 27% have inflation questions.
I understand that discussing finances can be difficult, especially if the family is struggling with debt, finding work or other financial problems, but learning at a young age how to properly manage money is a skill which will carry over into adulthood.
Whenever clients come in and we discuss financial difficulties they are having, I generally encourage the clients to have age appropriate discussions with their children about the situation, and what the parents are doing about it. These are great life learning lessons – take advantage of them! The conversations may not be pleasant, but the lessons parents can teach their children may be pain their children can avoid by repeating history when they are adults.
I am asked when it is a good time to start discussing financial issues with children. This depends on the children’s maturity levels, but many experts say first grade is a good starting point. Money lessons should happen all the time, at the grocery store, bank line when paying bills and should continue until adulthood. It is essential that parents take responsibility and teach financial literacy to their children because schools aren’t. Personally I am amazed that young adults in high school don’t know how to balance a checkbook, they have no concept of investing money and saving money.
The T. Rowe Price survey shows that only half or fewer of parents have strong financial habits. For instance, more parents save for a family vacation than have an up-to-date will. What’s more, one in ten don’t save regularly for retirement, purchase life insurance or save for a family vacation.
To Your Successful Retirement!
Michael Ginsberg, JD, CFP®