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For Better or Worse, Parents’ Financial Habits Affect Their Kids

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Kids’ money habits are formed before they get to high school, and their parents are often their most influential teachers.

A survey from T. Rowe Price – the Parents, Kids & Money Survey – analyzes parent attitudes and behaviors that were associated with kids’ financial habits. The survey includes a sample size of 1,014 parents and 1,014 kids ages 8 to 14.

According to the survey, positive money behaviors and expectations among kids are often associated with parents’ decision to let their kids decide how to save and spend their money on their own, as well as modeling good financial habits.

“Kids who have the freedom to manage their own money seem to have better money behaviors and are more truthful with their parents about how their money was spent,” Roger Young, a senior financial planner at T. Rowe Price and father of three, said in a statement. “I know firsthand the temptation of helicopter parenting, but there is evidence of a downside to this approach when it comes to money.”

According to the survey, 44% of the parents surveyed let kids decide how to save and spend their money on their own. Parents who let their children have control of their own money are less likely to have kids who spend their money as soon as they get it or who expect their parents to buy them what they want.

According to the survey, more than three-quarters of the kids who manage their own money say that they have money conversations with their parents.

“Giving them real life money experiences brings finances out of the conceptual and puts it into practice,” Young said in a statement.

Conversely, troubling financial habits among kids were more frequently seen when parents have a troubling history with money.

“It’s unsurprising, but still saddening, that parents with troubling money habits seem to be passing them on to their kids,” Young said in a statement. “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.”

For example, the survey finds parents’ bankruptcy and significant credit card debt can affect their kids.

According to the survey, 19% of survey respondents have declared personal bankruptcy at some point in their lives. The kids of these parents are more likely to “usually spend money as soon as they get it.” Compared with parents who have not declared bankruptcy, those who have are more likely to have kids who do not save any money they receive (16% vs. 6%).

Similar trends are found among families who have $5,000 or more in credit card debt, of which 48% of the survey respondents do.

T. Rowe Price encourages parents to invest in their kids’ futures by talking to them about money matters weekly. The survey found that parents who discuss financial topics with their kids at least once a week are significantly more likely to have kids who say they are smart about money (64% vs. 41%).

Frequent topics parents have used to initiate money conversations have included back to school shopping on a budget (47%), figuring out how much was saved by purchasing sale items (45%), going into a physical bank (41%), discussing the cost of college (41%), and discussing why they didn’t take a bigger vacation (34%).

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