They say talk is cheap, and that holds true when parents only discuss money in terms of spending with kids.
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According to a new survey by T. Rowe Price, 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 spendingânot the familyâs current financial situation.
âParents have a tendency to shelter their children from money,â says Brian Neal, wealth partner at Hefty Wealth Partners. âBut at the end of the day, money and financial responsibility is what can get kids in trouble if they donât have good habits.â
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.
Financial experts admit 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 that will carry over into adulthood.
âThey need to understand what money is and that itâs neither good nor bad but it can be used for good and bad,â says certified financial planner Karl Byrd. âAnother important thing to teach is that money is a finite resource.â
When to start discussing financial issues depends on childrenâs 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. âParents need to take responsibility and teach because schools arenât teaching it,â says Byrd. âPeople in high school donât know how to balance a checkbook, they have no concept of investing money and saving money.â
According to Neal, parents have to be cognizant that children mimic their parentsâ money habits. If they see their parents spending all their money on discretionary items they will be inclined to do the same when they get older. Being financially responsible on a daily basis will be more impactful then having a conversation about money, he says.
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. Whatâs more, one in ten donât save regularly for retirement, purchase life insurance or save for a family vacation.
Neal says giving kids an allowance can help teach money management skills by making them responsible for saving and buying items like school supplies and clothes.
âAllowance is not a bad thing as long as you make them responsible for some necessary spending,â says Neal.
As for talking to kids when the family is struggling finically, experts say how much you reveal depends on the age of the child.
âItâs important to teach children that life isnât always great,â says Byrd. âItâs an important lesson to learn but there are degrees of sharing.â