When Teaching Financial Literacy, Actions Speak Louder than Words
A Genworth study shows people whose parents set a good example are more likely to have a financial plan.
Adults who are involved with children through parenting, coaching and teaching often realize that their actions influence behavior more than their words. Of course, no one is perfect, and it can be challenging to explain that, sometimes, even adults don’t always match their deeds with their rhetoric.
However, many parents don’t apply the same adage when it comes to finances. Whether the issue is keeping up with the neighborhood Joneses, or wanting to provide their family with a new car and nice vacations, many kids only view the tangible examples of what their parents spend their money on and are unaware of the family’s basic financial plan.
Do parents sit down with their kids and explain the financial facts of life? Do they tell their teenage children that they have made plans for adequate life insurance, if one of the parents prematurely dies, or what their education and retirement savings strategies involve?
Parents may not be transparent about all of the family finances, but educating their children about the need to plan for the future is an important lesson. That includes understanding how to prioritize needs and take a responsible approach toward using credit, living within one’s means and making any charitable contributions.
And a new Genworth study released this week shows it matters.
Americans whose parents set good financial examples are more likely to be among the 62% who have a financial plan and feel confident in their financial future, according to the study, Psychology of Financial Planning, which is based on survey results of more than 1,000 adults age 25 and older with a household income of more than $50,000.
The results, which are the first in a series being released this year, also report:
- Younger Americans are taking steps early to plan: 61% of respondents ages 25 to 39 have a financial plan, which is comparable to the 61% of respondents age 40 to 50 and the 63% of respondents over the age of 60 with a plan.
- Parents who set a good example make a difference: 66% of respondents who believe their parents set a good example for them in terms of financial planning have a financial plan, and 71% feel confident in their financial future. In comparison, 55% of respondents who did not have parents who set good financial examples have a financial plan and 53% feel confident in their financial future.
In addition, Genworth has produced a video that shows how financially prepared Americans really are—or aren’t.
Financial literacy is a huge challenge for our nation. Just as parents help their kids learn to read and write, they should not expect schools or other people to be the only ones who educate their kids about financial realities.
So, as the Genworth study points out, set a good example at home to help children set their financial sails in the right direction.
Dave Evansis a certified financial planner and an IA l-h contributing editor.