They can teach saving and budgeting — barely — but not much else
Many parents are fine with teaching their kids about saving money, but the buck literally stops there.
When it comes to specific personal finance lessons, like saving for retirement, investing, and credit history, parents aren’t as helpful to their children, according to a survey from U.S. Bank. It turns out, parents may be misinformed about some finances topics and can’t accurately teach their children about them.
“Talking to teens about money should be as routine as brushing your teeth or grocery shopping,” says Robyn Gilson, U.S. Bank Coach for Student Financial Education. “They need to be confident about credit and planning for the future, otherwise the impact is costly.”
According to the survey, 77 percent of parents talk to their kids about saving money in general, and more than half talk about budgeting and building/maintaining credit. But only 30 percent of parents talking about investing money, while 32 percent educate kids about saving money for retirement.
That could be because parents themselves don’t understand personal finance well. Fifty-one percent of parents think the amount of money you have in the bank affects your credit score, while 52 percent believe checks and debit cards help build credit. Neither is true. Misinformed parents lead to misinformed kids.
“The stakes are high once kids go to college,” Gilson says. “Worse yet, bad habits may be passed along to future generations.”
The sandwich generation is financing their adult children
Many young adults don’t have a clue of what goes into budgeting, and that could be because their parents never let them in on household finances. The U.S. Bank survey says 56 percent of parents of 18-24-year-olds had little to no involvement in family finances. It’s no wonder they don’t understand what to do with money once they leave the nest.
The number one problem parents have with how young people think of money is that there is too much reliance on mom and dad. Parents are also concerned that their adult children don’t care about long-term goals or understand how important saving for retirement is.
Parents who are supporting their adult children also face the challenges of supporting their aging parents. Pew says almost half of adults in their 40s and 50s are financially supporting a parent 65 or older while also financially supporting a grown child.
How to teach kids about money at any age
Educating children about money should start early — even as young as two years old. Good financial habits will help them throughout their lifetime if you do a good job.
There are budgeting games, apps, and fun money lessons all over the internet. Let them watch you and ask any question they have about how things work. It may seem tedious or annoying but they’re actually happy to learn.
For young ones, make it fun. Kids 2-5 years old can learn addition and subtraction while counting money. For bigger kids, 6-10 years old, show them how to set up a savings account and budget an allowance. Expose them to what you do when you get paid and where your money goes.
For pre-teens, introduce how to get an income, like earning money for chores or babysitting for neighbors. For teens, it’s important to talk about the cost of college and how student loans work. You may not want to think about getting them a credit card yet, but show them how credit scores work and what goes into a good credit history.
No matter what age your child is at, don’t hide financial information from them. Show them how a dollar is earned and what it means when it is spent or saved.