Parents who save money have a different impact on their children’s behavior than those who don’t.
Bad money habits start young.
Parents who have bad money habits are likely to pass them onto their children, as indicated by a new study by the asset management firm T. Rowe Price. The firm surveyed about 1,000 parents of children between 8 and 14, and then separately surveyed their children.
- Some 98% of children whose parents had at least three types of savings — retirement savings, emergency funds or college savings, for example — said they had money saved, compared with 86% of children whose parents don’t have three types of savings.
- The savers’ children were also more likely to say they talk to their parents about money: 83% compared with 66% of those whose parents don’t have as many types of savings accounts.
And the good habits of the savers’ children continued:
- They were also less likely to say they spend their money as soon as they get it: 40% versus 52% of those whose parents don’t have at least three forms of saving.
That number was even more stark among parents who said they have declared bankruptcy:
- 71% of those who have declared personal bankruptcy had children who usually spend money as soon as they get it, compared with 42% of those who haven’t declared bankruptcy.
“It’s unsurprising, but still saddening, that parents with troubling money habits seem to be passing them onto their kids,” said Roger Young, a senior financial planner at T. Rowe Price, in the report. “These parents are hit with the double consequences of their own financial mistakes and the prospect that their kids may be set up to relive them.”
It isn’t a lost cause, though, the firm found. Young recommended openly discussing finances with children — even money mistakes, so the whole family can learn from them and not pass shame or embarrassment about money to the next generation.
- Parents who discuss financial topics with their kids at least once a week were more likely to have children who say they’re smart about money — 64% compared with 41% who don’t.
Letting kids manage their own money can help:
- Almost half of the parents surveyed said they let their kids decide how to save and spend their money on their own.
- Of those, 40% of kids said they spend their money as soon as they get it, compared with 53% of those who don’t have control of their money.
- And kids who control their own money are also 13% less likely to expect their parents to buy them whatever they want.