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Forget stuffing the trust fund. If you want your child to have a secure financial future, don't just focus on how much money you leave them, begin the financial discussion early with them, so they can learn how to manage their own money.
The new 2016 Parents, Kids & Money survey by T. Rowe Price found 68% of parents who discuss financial topics with their children,(ages 8-14), at least once a week are more likely to have kids who say they are smart about money. That's compared with 38% of parents who do not have financial discussions with their children.
Okay, but how do parents discuss financial topics with their kids? 85% of respondents said they generally just talk for a few minutes, as things come up. Only 15% of parents said they set aside a specific time to discuss money topics with their kids. 59% generally only talk to their kids about money when they ask about it.
Importance of Financial Discussions
Getting the conversation started seems to be a major hurdle.The survey found 71% of parents are reluctant to discuss financials matters with their children.
What are the most important topics for parents when it comes to talking with their children about their financial future?
*89% of parents highlight the importance of saving
*83% place emphasis on how to earn money
*80% focus on maintaining a budget and setting financial goals
*55% of parents say it's important to discuss giving to charity
*54% of parents believe it's important for their children not to talk about money in public
Who's more likely to bring up topics of finance? The survey found that boys ask about money more than girls. Also, men are more likely than women to discuss the importance of saving and spending wisely at least once a week, or more.
Talking to Boys & Girls
Parents also talked to their boys more than their girls about money, because boys asked more questions and seemed more interested. However, the survey also found 43% of parents thought their boys needed more help with their money, compared with 30% for girls.
Allowing Kids to Manage Their Finances
The report found 68% of parents allow their kids to decide what to save their money for and 67% let their kids decide what they spend their money on. About 30% of parents let their children manage their own accounts. But only 19% of parents have showed their own financial statements to their kids.
How old do parents think kids should be to get an allowance? 46% of parents believe the appropriate age is between 5 and 9. About 30% think kids should be between 10 and 14.
Amount of Allowance
The majority of parents believe they will give an allowance, but their kids have to earn it. Men are more likely than women to give allowance.
*61% of parents give their kids $10 or less a week
*18% give their kids $11 to $20 a week
*20% give their kids $21 or more per week
How much of their allowance do kids save?
*9% save none of it
*25% save less than half of it
*29% save half of it
*22% save more than half of it
*15% save all of it
As you can see, there's a lot of diversity when it comes to how to teach your children about money. No one way is going to best for everyone, but you starting early and often seems to be the best plan.