4/25/2014 3:00 PM ET|
Teaching kids about money hard for paycheck-to-paycheck parents
Have you had 'the talk' with your children? No, not the birds and bees -- the dollars and cents.
Parents want to be good financial role models for their children, but many are facing financial problems of their own and don't know where to start.
More than two-thirds of parents said they are "very or extremely concerned" about setting a good financial example for their children, according to a survey released earlier this year by the investment management firm T. Rowe Price. Yet one in four parents said they're "not good with money" so they don't think they should be the ones to teach their kids about it.
Many parents don't want to talk to their kids about finances, often because they don't want them to worry about the financial challenges the family may be facing, financial advisors say. Others just don't think they're prepared to have the conversation.
"A lot of parents think they don't know enough about money themselves, so they're reluctant to talk about it," said Stacy Francis, a New York certified financial planner who is also founder of "Savvy Ladies," a nonprofit financial empowerment organization for women.
"Parents in huge amounts of debt or living paycheck to paycheck think they're least qualified to talk to their kids when they may be most qualified," Francis said. "They can share what's been working and what's not been working."
Some parents believe they have to know all the answers—they may not—and that is OK, financial advisors say. More important is that they encourage good financial behavior, but that's not always easy to figure out how to do.
"The relationship with parents, kids and money is pretty complicated," said Stuart Ritter, a certified financial planner with T. Rowe Price. "One of the things we learned from parents is they'll borrow money from their kids to tip the babysitter. Hopefully they're putting it back. And they're bribing their kids. They're using the money as a reward."
Nearly half of the 1,000 parents surveyed in the new T. Rowe Price report admit they bribe their kids with money to encourage them to do the right thing. And when parents run out of cash, almost one-third admitted they sometimes "borrow" money from their childrens' piggy banks.
The piggy bank may not hold the same cachet for kids today that it did when their parents were growing up. Most of the financial transactions they see made are on a mobile phone or laptop. Of the 924 kids ages 8 to 14 who participated in the survey, 54 percent said they use and make purchases on mobile apps and 61 percent shop online. Even a third of parents said cash has become "obsolete."
Still, a great way to get the conversation started is to give children a cash allowance, said Francis. "It's a good way for kids to start to learn responsibility—allowing them to spend a portion now, save some for a big goal, save some for college and give a portion to charity."
There can be many teachable moments, agrees Ritter. Parents just need to be more proactive to incorporate money matters into the conversation.
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In grade school there was this kid who came from a poor family, single-parent dad who was this broke hippie but he did smething for his son that I wish my parents had done for me. Every month he would give his son a certain amount of $ that the son wld have to use to pay for his meals/clothing/rent, he wld have to pay his dad for everything he used it was like a game. If he came up short his dad would charge him interest and if he had smething left over at the end of the month he could save or spend it however he wanted.
Guess you grew up being really with money?
All I can say is that times are changing...
As a graduate student in my mid-twenties in NYC, here is what I know: I plan to graduate, get a decent job (thankfully my field is not in the toilet like so many others), live in a small house, minimize the number of possessions I have, pay off my student loan debt, save as much as I can for my children's education and my retirement, pay my $350/month health insurance premiums and my $25/month auto insurance premiums (thanks Insurance Panda). I won't have the big suburban house, the fancy cars, the extraneous material possessions. Gifts will be experiences with loved ones, not things. Vacations will be camping, not at resorts.
My generation is looking at a very different reality than we were promised by our parents. In some ways, it's a disappointment. In other ways, it seems a lot healthier than a life of excess. Mostly, it's paying the debts of the elder generations who have misspent our futures on war (I was in middle school when you said 'Go to war, twice, for no reason'), supporting the elite wealthy class, and oppressing the poor and the sick. Don't you dare call me entitled, or lazy, or self-centered, or unprepared. I'm well prepared to fight for myself and my family. There's no other way to survive.
Here's a valuable money-saving lesson to teach your kids: How to put one-pound of dried beans or peas in a pot to soak in the refrigerator overnight. Then, how to drain and rinse in a colander and put back in the pot with fresh water to cover. Put the pot on the stove, bring to a boil, cover and turn down to a simmer...and set the kitchen timer for about 1-1/2 hours...go read a book...when the timer goes off, it's all-you-can-eat time.
Lentils are even quicker--no soaking at all and a 45 minute cook time (which just happens to also be the cook time for brown rice---so you can put both in the same pot if you want to). You can read, take a bath, etc. during those 45 minutes it's cooking.
If you eat wheat, teach your kids how to bake bread. They can learn at a very early age.
When my grandmother was 8 years old her mother died and she and her siblings were sent to live on her grandmother's farm. One of her many farm chores was to bake 21 loaves of bread per week using a wood cookstove. If my grandmother was able to do that at age 8, your kid(s) can certainly learn how to bake fewer loaves with a modern oven.
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