Are your kids ready for the financial challenges of adulthood? The 10th annual Parents, Kids, and Money Survey from T. Rowe Price shows the benefits of early financial education, including both formal schooling and parental guidance.
The T. Rowe Price survey typically polls children aged eight to fourteen years old, along with their parents, to assess early financial understanding and habits. For the 10th annual survey in 2018, T. Rowe Price decided to switch their focus to young adults from eighteen to 24 years old to follow-up on the first survey, when those young adults would have been in the proper polling range.
T. Rowe Price's findings aren't surprising. Financial education in school is important, but what kids learn at home has an even greater impact.
Young adults who received at least some financial education in school are more likely to demonstrate good saving habits compared to those who did not (59% to 41%). An overwhelming majority (88%) of respondents who took financial education courses in school use what they learned at least occasionally. A similar percentage of respondents (84%) were glad that they received financial education and 86% suggest that all schools require it.
Those with financial education in school were more likely to have a budget (88%, as compared to 73% without financial training). They were also more likely to have emergency funds (60% to 43%), to devote 10% of income to savings (66% to 48%), and to have a retirement account (56% to 36%).
However, school benefits are limited. Over three-quarters (78%) of young adults didn't receive financial education until their senior year in high school or college. Over half (53%) still felt underprepared for adult financial challenges – perhaps because school courses just include the basics.
Only three in ten respondents with financial education were taught about retirement savings, and only 28% learned about inflation. Investment topics like asset allocation and diversification received less exposure, included in only 13% of respondents' classes.
Are you ready to fill in the gap in your child's financial education? You should be, because you have the most influence. Approximately one-third (34%) of young adults who received financial education said that what their parents taught them about finances was a lot more influential than what they learned in school. Another 20% thought parents had a little more influence, while 27% considered home and school equally influential.
It's important to start early. The 2019 T. Rowe Price survey shows that a surprising 17% of kids aged eight to fourteen years old have used a credit card. That's a positive – as long as you're using card access as a teaching tool and have financial discussions along the way. Two-thirds of parents are reluctant to discuss finances with their children in that age range. Half of the young adults polled didn't have financial conversations until age thirteen and 30% didn't have any financial discussions before age fifteen.
Formal financial training certainly helps, but you're responsible for getting your kids off to a good financial start. Teach them early about the value of money and give them increased responsibilities as they mature – eventually leading to bank accounts and credit cards to manage. They'll build credit and have the necessary tools for financial success, along with the understanding to use them properly. Check out our list of starter credit card offers for people with limited or no credit history.
If you're not sure you understand financial topics well enough to teach them to your children, consider taking a class and researching the topics yourself. Plenty of online resources are available to help (HINT: MoneyTips.com). You're never too old to learn helpful financial habits.
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