Father’s Day just passed, but according to the COUNTRY Financial Security Index, 82 percent of Americans feel parents should bear the responsibility of teaching kids about money.
Yet, Americans aren’t confident in the ability of parents to successfully teach their kids fiscal responsibility.
- More than half of Americans (55 percent) feel parents are doing a below average job of passing along financial lessons to the next generation.
- That lack of confidence may be causing some parents to avoid the conversation entirely.
- Just 45 percent of those surveyed said parents are the main source of financial lessons, with moms doing a slightly better job at educating, particularly for their daughters.
- Thirty-six percent of Americans say they taught themselves the majority of financial lessons.
Lessons that matter most
Americans are in agreement that teaching kids about money is important, but they’re divided on when parents should stop supporting their children financially. Thirty-one percent believe parents should stop supporting their children when they get their first full-time job, whereas 24 percent think kids should be on their own sooner, when they graduate college or technical school.
“While Americans’ opinion of when a young adult should become financially independent may differ, most agree kids should start learning the basics of personal finance early,” said Joe Buhrmann, manager of Financial Security Field Support at COUNTRY Financial. “The responsibility to help your kids become financially literate can feel like an overwhelming one for many, but it doesn’t have to be.”
For fathers (and mothers) who are unsure of where or how to begin these conversations, COUNTRY Financial provides tips for teaching youngsters to spend, save and plan effectively:
- Half of Americans (50 percent) think living within one’s means is the most important financial lesson to teach children. Show your kids the difference between “needs” vs. “wants” by using real world examples. Explain the concept of sacrificing wants, like a new toy, to buy needs, like school supplies. Lead by example, and explain your own “wants” vs. “needs” choices to your children to help them understand.
- Developing a budget is the first step to maintaining controlled spending habits. Despite that, only 19 percent of respondents listed budgeting as the most important financial lesson. Any kid can learn to budget their money. Buhrmann suggests a 50-40-10 system – for each allowance or birthday dollar received, encourage them to save 50 percent, spend 40 percent and donate 10 percent. This concept helps kids understand the importance of categorizing money.
- When your child wants a pricier item, encourage them to set up a savings account to help pay for it. Making weekly or monthly contributions to reach their goal can teach the value of delayed gratification and the value of saving.
- To teach strong saving habits, have children allocate an amount of their allowance or earnings to a savings account each month. You can also consider matching your child’s contributions, similar to the process of a 401(k). These actions teach the benefits of compound interest and the importance of saving.
“Children follow by example, show them how you work to maintain financial security,” said Buhrmann. “Start with the basics — showing them how you create a financial plan, and how it includes items such as income and expenses, and saving for the future. Talk to them about why.”
See Also:
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
