The results indicate that teaching kids about money today blends time-honored incentives (such as more cash) with first-hand responsibility for thorny aspects of contemporary personal finance.
“There is some evidence that kids model their parents when learning how to handle money,” says Judith Ward, senior financial planner at T. Rowe Price. And spending habits seem easier to pass from parent to child than saving habits.
Proving that the apple doesn’t fall far from the tree, “spender” parents—those who identify themselves as spenders—are likelier to have “spender” kids (64%), Ward tells PLANADVISER. Parents who self-identify as “savers” are more apt to have “saver” kids (52%).
“However, what isn’t said or modeled is also important,” Ward cautions. “Kids don’t miss a thing!” The survey found that more than half of kids (61%) think their parents worry about money. And while 82% of parents think they are setting a good financial example, fewer than half (46%) of kids say their parents are doing a good job teaching them about money.
Sometimes, doing the opposite of what parents model turns out to be a good thing. Ward says the survey found that kids can learn from their parents’ mistakes. “In our Family Financial Trade-offs survey, 55% of respondents said they that because their parents are struggling with retirement (or will be), they decided to start saving for retirement early so they won’t end up like their parents,” she says.
Parents want kids to learn about money the hard way, and the survey found that many kids suspect their parents have told them they can’t afford something when they really can (68%), while a smaller group feels their parents use the “do as I say, not as I do” mantra when teaching them about finance (40%).
Among other findings of the survey:
- More than half (58%) of parents let their kids make bad financial decisions so that the kids learn from their own mistakes.
- More than half (52%) of parents believe their kids should have their own credit cards to learn about managing money, and 61% think it’s important for kids to have their own student loans so that they can learn about debt and responsibility.
- Kids don’t understand credit or loans. Only about one in five (21%) feels knowledgeable about credit, and only 19% feel knowledgeable about student loan debt.
- Kids also don’t think parents are great teachers. Fewer than half (46%) say their parents are doing very or extremely well at teaching them about money and finances. More than a third (35%) claim to learn more about money at school than from their parents.
- Most (70%) parents reported giving their kids an allowance in 2015. In 2013, 47% of parents indicated that they gave an allowance.
- Most (85%) kids who get allowance are required to earn it, compared with 15% of kids who get allowance with no requirements. About half of parents surveyed reported giving their kids $10 or less per week and almost one in 10 parents (9%) gives kids $51 or more per week.