Here’s a head scratcher …parents worry about spoiling their kids, and do it anyway, often with funds that should be designated for a 401(k).
Those are some of the findings of a recent survey from T. Rowe Price’s “2016 Parents, Kids & Money Survey” released on Tuesday. Key stats include”
- Nearly half of parents (46 percent) have gone into debt to cover something their kids want
- 72 percent of parents do not have sufficient emergency funds to cover at least three months’ worth of living expenses, including 49 percent who do not even have an emergency fund. T. Rowe Price recommends having an emergency fund large enough to cover at least three to six of living expenses in the event of an unanticipated need.
- 44 percent of parents have used their retirement savingsto fund non-emergencies during the past two years
- 53 percent of parents agree with the statement, “If I save 6 percent of my income toward retirement, I’ll have enough money to comfortably retire at age 65.”
“These new findings reinforce the fact that many American workers are challenged to make ends meet,” Diana Awed, head of product and marketing for T. Rowe Price Retirement Plan Services, said in a statement.
When asked how often they take advantage of teachable moments that occur throughout the day to discuss financial topics, less than half of parents (44%) take advantage of the opportunity to discuss money with their kids most of the time. And while many parents have some reluctance to discuss family finances (71%), they tend to talk to boys more about money than girls. When asked why, one of the top reasons given was that boys need more help with money.
Stuart Ritter, CFP, a senior financial planner at T. Rowe Price and father of three, noted, “It’s always fun to throw elaborate birthday parties and see our kids’ faces light up when we buy them the most coveted toy in the store, but the cost isn’t worth it if we’re jeopardizing our families’ financial security and causing anxiety. We do ourselves and our kids a disservice by not living within our means and funding long-term goals such as retirement.
“Parents are likely to find that investing their time in having money conversations with their kids will have a far greater impact on their kids’ lives long after the latest gadget or toy is discarded. We know that many kids are talking about money with their friends often and even lending it to each other. They’re learning about money, even if parents aren’t discussing it. And it’s important that they learn the right money lessons.”