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:
- Take advantage of everyday teachable money moments – Trips to the grocery store, attending a sporting event, getting money from the ATM, and planning family vacations are just a few examples of opportunities for parents to reinforce financial lessons.
- Set a good example – In order to help their kids learn, parents should not only teach the core financial concepts but also demonstrate good financial habits through their own behaviors.
- Help your kids set specific savings goals – With kids wanting to know how to save more, parents can help them set short- and long-term savings goals that provide an incentive to save, while also helping them make smarter spending decisions that leave more money available for saving.
- Don't be afraid to talk openly about finances – Although parents don't have to reveal everything, openly discussing family finances will make it more likely that kids will learn and share financial lessons – and help them understand that the topic of money is not taboo.
- Learn with your child – Fun activities where parents learn alongside their kids can be a welcomed shared experience, especially for topics such as inflation, diversification, and asset allocation that parents say they do not understand as well.