The third annual Parents, Kids & Money Survey from T. Rowe Price reveals that 86 percent of parents feel they – more so than educators or others – should have primary responsibility for teaching their kids the basics of personal finance. Yet, parents on average only grade themselves a B- for serving as role models regarding their saving and spending habits, with more than one-third grading themselves a C or lower.
Similarly, parents on average grade themselves a B for their personal knowledge about money, with more than one-quarter grading themselves a C or lower. Just 28 percent of parents say they are very prepared to discuss basic financial principles such as setting goals, the importance of saving, smart spending, inflation, and diversification. Parents actually find it easier to discuss drugs and alcohol with their kids than family finances. They also find talking about investing just as difficult as talking about puberty/coming of age.
In addition, two-thirds of parents think they could be doing more to teach their children about money. The survey results are released in recognition of Financial Literacy Month, which occurs in April.
“The need for financial education has never been greater,” says Stuart Ritter, CFP®, a T. Rowe Price financial planner and father of three. “There are opportunities each and every day to share important lessons with children, and with kids able to grasp many of these important financial concepts at a young age, these conversations can start as early as elementary school, if not sooner. Parents don’t need to be experts, but they should be able to share the basic tenets that will put their children on the right financial path.”
Mr. Ritter offers parents five tips for discussing family finances with their kids:
1.Take advantage of everyday teachable moments – such as going grocery shopping, opening the household bills or planning a family vacation – to reinforce financial lessons and make them more memorable.
2.Help your kids set specific savings goals – both short- and long-term – to provide real-life incentives and make the general advice to “save” more concrete. This will also better equip them to make smarter spending decisions.
3.Emphasize prioritization and focus on tying spending decisions back to the goals when your kids want something else. This can be a better approach than simply saying “no” and helps put the decisions in a context they will understand while making it easier to discuss the trade-offs.
4.Have open communications about the financial choices the family has to make and be careful about how you react to money issues. While you don’t need to reveal all financial details such as exact household income, it’s important to let kids know that the topic of money is not taboo and is open for discussion.
5.Make money conversations fun – which will better engage your kids and avoid the eye rolls that tend to accompany these types of discussions.
SOURCE: Media Release, T.Rowe Price, 31 Mar 2011