The 2012 Parents, Kids & Money Survey from T. Rowe Price, which surveyed parents, and for the first time, their kids, reveals that kids ages 8 to 14 want to know more about money matters, particularly about saving and how to make money. Yet, while talking about money is generally encouraged, and 76% of parents are having money conversations with their kids at least somewhat often, survey findings indicate that parents are not doing enough to teach their kids basic financial lessons. The survey results also revealed that although kids give their parents a B+, parents were found to be lacking as financial role models.
"Kids are eager to learn, and if we want to put them on the right financial path, parents need to be open and honest about money, demonstrate better financial behaviors and spend the time teaching basic financial lessons the way they do other skills," says Stuart Ritter, CFP®, a T. Rowe Price senior financial planner and father of three. "While kids think their parents are good financial role models and do a good job teaching them about money, parental behavior suggests there's a lot of room for improvement. Parents don't need to be experts, but doing more to instill sound financial habits is crucial, especially given the uncertain financial future parents believe awaits their kids and if they don't want their kids to have the same financial regrets they do."
According to the survey, 77% of parents say they are not always honest with their kids about money-related items, with 15% not telling the truth at least weekly. Most commonly, 43% of parents report not being honest about how worried they really are about money, 32% tell their children they can't afford something when they really can, and 27% withhold information about the family's true financial situation.
When it comes to financial discussions, the survey revealed that parents are more comfortable talking about bullying, drugs, and smoking than family finances or investing, and find talking about investing just as difficult as talking about puberty/coming of age. In addition, while most parents (82%) say they are at least fairly well prepared to discuss basic financial concepts such as setting goals, the importance of saving, spending smartly, inflation and diversification, they are not following through and teaching these lessons to their kids. Only half (51%) are teaching how to set a savings goal, only 46% are teaching about spending/savings trade-offs, and very few are teaching about inflation (19%), investing (16%), diversification (11%), and asset allocation (8%).
Parents also do not always set the best example when it comes to their own finances, with only half regularly setting aside money to save/invest, only 43% setting savings goals, and only 24% ensuring investments are diversified.
T. Rowe Price offers parents five tips for helping kids learn money basics and develop better financial habits:
Additional survey findings include:
Parents Believe Life on Other Planets More Likely Than Kids Having a Secure Financial Future: More parents feel that it is likely that life exists on other planets (59%) than Social Security will be available in its current form when their kids retire (26%) or that their children will become millionaires (39%).
Family Finances a Taboo Subject: Nearly one-third (32%) of parents say they avoid talking with their kids about the family's current financial situation.
Kids Say They Go to Moms First with Money Questions: More than half (54%) of kids report they go to their moms first when they have a question about money, compared to 40% who go to their dads first.
Parents Don't Always Agree on Money Matters – and Kids Know It: Nearly half (46%) of parents say they don't always agree on money matters, and 42% of kids are aware of these disagreements.
Understanding of Investing Basics Lags – For Kids and Parents: When asked what gives money the best opportunity to grow over a long period of time, fewer than half of kids (48%) and parents (49%) chose stocks over bonds and a safe deposit box, with nearly a quarter (22%) of kids choosing the safe deposit box. Likewise, when asked the best way to diversify a wardrobe, only 59% of kids and 70% of parents correctly answered, "to buy clothing in several styles and colors." A quarter of the kids and 23% of parents chose "donate the clothes you don't wear," while 16% of kids and 7% of parents answered "rearrange the clothes by size."
Kids Grade Their Parents Higher as Role Models: Kids on average graded their parents a B+ as role models regarding saving and spending habits, with 44% giving them an A. Also, almost all kids (92%) think that their parents do a good job teaching them about money. Parents, however, graded themselves a B- on average, with only 17% giving an A and nearly one-third (31%) grading themselves a C or lower.
Parents Themselves Didn't Get a Strong Financial Foundation Growing Up: Many parents (39%) report that their own parents did not do a good job teaching them about money.
Parents' Financial Regrets Correspond to Core Financial Lessons: Knowing what they know now, parents say their biggest financial regrets are not saving enough (43%), spending too much/being in debt (32%), started saving too late (29%), wrong job/career choice (22%), and not setting financial goals (17%).
Kids Welcome Online Games as Teaching Tools: Most kids (85%) think an online financial game would help them learn the basics about saving and spending.