8/14/2019 | Team United
A recent T. Rowe Price survey revealed that “adulting” is harder for young adults who did not receive any financial education. In fact, 64% of young adults were surprised at how little they knew about managing money once they had to start dealing with real-world finances. Those who didn’t receive any financial education are less likely to have a budget, an emergency fund, and retirement savings.
According to some experts, financial illiteracy, overall, is a growing epidemic. Surprised? Let’s look at some data.
Money-management skills are more important than ever, yet most states still do not require high schools to offer personal finance classes. If formal classes are offered, most don’t begin classes until high school or college.
These personal finance statistics show how much today’s youth are lacking in education about practical financial subjects.
It turns out the apple doesn’t fall far from the money tree, so to speak. In lieu of high school personal finance classes, most teens either learn from their mistakes or look to parents for personal finance lessons. As many as 54% of young adults say parents had an influence on their financial habits and behaviors.
Another survey by T. Rowe Price found that positive money behaviors and expectations among kids are often associated with parents' decision to let their kids decide how to save and spend their money on their own, as well as modeling good financial habits.
These parents are more likely to have kids who have money saved (98% vs. 86%) are also less likely to:
Conversely, troubling financial habits among kids were more frequently seen when parents have a troubling history with money.
Although parents carry a lot of influence on how their kids handle and look at money, many still have some reluctance to discuss financial matters.
Whether you’re good with money or not so much, kids are always watching and drawing their own conclusions from what they learn from you. Even parents who harbor an extra cautious or fearful approach toward money may also pass down unhealthy money habits, say experts. But spending some time understanding your financial psychology can be incredibly valuable in helping improve your financial health and can also help you be a better parent.
So how can you turn it around?
The same study from T. Rowe Price says that parents who discuss financial topics with their kids at least once a week are significantly more likely to have kids who say they are smart about money (64% vs. 41%).
Frequent topics parents have used to initiate money conversations have included:
Even parents who handle money responsibly can inadvertently send their children the wrong message if they avoid talking about it. If you’re not talking about money, you’re giving your kids a message about your money. What’s more, talking with your kids about money can shape their experiences and give them the opportunity to learn from your successes and mistakes
Psychologists have identified four financial patterns that research has shown to powerfully influence people’s actions:
Financial education has to start at home — and long before kids enter high school. Indeed, studies show that children make their first assisted purchases at age 3 (choosing the cereal in grocery stores is the most common initial purchase), and allowances that provide opportunities for discretionary spending often start at age 6. So parents need to be the ones to begin providing the financial education kids need in order to be money-savvy adults.
What ways have you started teaching your children about money? Opening a savings account of their own can help start teaching them early on the essentials of saving. If you haven’t done so already, open one today or learn more about United Federal Credit Union’s Youth Savings Accounts!