A majority of parents are falling short when it comes to teaching their children the importance of saving money.
T. Rowe Price found that 71% of parents are reluctant to have financial discussions with their kids. Maybe that’s because they’re not doing such a great job at putting money away themselves. The study found a majority of parents have insufficient emergency funds to cover at least three months’ worth of living expenses. And almost a quarter of parents have used retirement savings for nonessential expenses, such as vacations.
Judith Ward, Senior Financial Planner at T. Rowe Price thinks parents should take advantage of teachable moments anyway.
She suggests “Combining money conversations with opportunities to experience money – such as giving an allowance, opening an account for kids, or giving them a limited amount of money in their favorite store – as the most effective way to raise money savvy kids.”
Experts say financial literacy is more important as children become adults because without a cash down payment they’ll likely not be able to obtain a loan to purchase a car or a home.
As for mom and dad? Joanne Kerstetter, Spokesperson for Money Management International says any savings plan should include paying yourself first, perhaps having an amount deducted from your pay or checking account.
And then develop short, medium and long term goals to estimate how much you’ll need for each goal and set aside in a savings plan.”