In 2004, the United States Senate designated April as National Financial Literacy Month. We thought it would be good to mark the event by taking a look at how well parents are doing when it comes to helping their children develop healthy relationships with money.
Financial experts and behavioral economists will tell you that parents are one of their childâ€™s most impactful role models when it comes to managing money, and a new survey by T. Rowe Price finds that many arenâ€™t making the grade.
The 7th Annual Parents, Kids, and Money Survey, which surveyed parents with kids between 8 and 14 found that:
- Â 46% of parents have gone into debt to pay for something their kids wanted.
- Â 44% of parents have used their retirement savings to fund non-emergencies during the past two years, including paying off debt (17%), vacation (17%), kids’ education (16%), and day-to-day expenses (15%).
- Â 71% of parents are reluctant to talk with kids about financial matters.
â€œParents are likely to find that investing their time in having money conversations with their kids will have a far greater impact on their kidsâ€™ lives long after the latest gadget or toy is discarded,â€ says Stuart Ritter, CFPÂ®, a senior financial planner at T. Rowe Price and father of three.
â€œWe know that many kids are talking about money with their friends often and even lending it to each other. Theyâ€™re learning about money, even if parents arenâ€™t discussing it. And itâ€™s important that they learn the right money lessons,â€ he adds.
When it comes to teaching kids about money, ask yourself:
- What are the 5 most important things I want my child to know about money?Â Think about what youâ€™d like them to know about debt, saving, investing, and budgeting.
- What is the most important thing I want my child to avoid when it comes to money?
- If I could convey one thing about money to my child, what would it be?
- What changes do I have to make to my financial behavior to be the role model my child wants me to be?
Write down your answers, and set a time to have a talk with your child. Itâ€™s an ongoing conversation and they are watching you all the time, but the most important thing is to begin.