A Schwab press release said nearly all parents (97%) believe it is important to teach their teens to save and invest for retirement and almost half (48%) worry that their kids will not start saving soon enough, yet only 19% have taught their teens how to invest money to make it grow and even fewer (14%) have taught them what a 401(k) plan is.
Half of all parents think their teens will need to have less than $500,000 saved to retire by age 65, including 38% who believe their teens will need to have less than $200,000 saved.
One problem the survey found is more than two-thirds of parents (69%) admit to feeling less prepared to give their teens advice and guidance about investing than they do the “birds and the bees.” Another barrier to teaching kids about finances may be the misconception that teens are not interested in learning about personal finance. More than two-thirds of parents (67%) say they think learning about money management, including budgeting, saving and investing, is not one of their teen’s top priorities.
The survey also found 60% of parents identify their teens as “quick spenders,” and most acknowledge they could do a better job of teaching and preparing their kids for the financial challenges of adulthood, including budgeting, saving and investing. Only about one in three (34%) has taught their teen how to balance a checkbook, and only 29% say they have explained how credit card interest and fees work.
While most agree that the best way for teens to learn about money is from guided, hands-on experience or their own example (71%), only one in five parents (20%) involves their teen to a great extent in the family’s budgeting and spending decisions. One-quarter do not involve their teens in these decisions at all. Parents admitted they are much more apt to teach their kids how to do laundry (70%) than how to pay bills (43%), the release said.
Nearly all (93%) American parents with teens age 13-18 say they worry their teens might make financial missteps such as: overspending or living beyond their means (67%), getting in over their head with credit card debt (65%), failing to save for emergencies (60%) or failing to stick to a budget (57%). A full third of parents (33 percent) say they anticipate their “golden years” will likely involve helping their kids financially.
While the majority of parents consider learning about budgeting (63%) and credit card management (55%) as more important for today’s teens than when they were young, few claim to have taught their children these basics (49% and 29%, respectively).
Although three-quarters of parents (75%) consider themselves good financial role models for their teens, the data suggest otherwise, according to the press release. The majority of parents surveyed characterize themselves as "quick spenders" vs. "stellar savers" (52% vs. 48%), and more than one in four parents surveyed (28%) are not currently saving for either their own retirement or for their child's college education.
Schwab offered in the press release practical ways for parents to get started teaching their teens about finances:
- Include your teen in discussions about the household finances.
- Be prepared for your teen's financial rites-of-passage w hether it's a first job, saving for a car, using a credit card, or saving for college, real-life events provide opportunities to bring basic financial concepts to life.
- Provide your teen with an allowance and stick to it.
- Encourage your teen to get a part-time or summer job.
- Teach your teen how to use financial tools like checkbooks and credit cards.
- Help them make saving an automatic part of their lives.
- Show them the money. If you participate in a retirement plan, like a 401(k) or IRA, talk about what a great vehicle it can be to make money grow. If you feel comfortable doing so, you can even consider showing them your own account statements to help them understand the power of compound growth over time.
The Parents & Money survey was conducted online by Kelton Research which polled 1,000 American parents with teens between the ages of 13-18. A detailed fact sheet on the survey can be found at h ttp://www.aboutschwab.com/community/financial-literacy/index.html .