Source: Reuters
If you worry whether your kids will fall into the future ranks of “haves” or “have-nots”, consider your own financial behaviour in a more imperative duality: Are you a “doer” or a “dreamer”?
As college tuition and student loan debt continue to soar and job growth for graduates looks sluggish in many fields, the guidance parents give their kids matters more than ever, according to a recent investor survey by TD Ameritrade.
Sampling more than 1,500 adults aged 22 to 81, the survey defines doers as financially responsible across the board. For starters, they have retirement accounts, follow a budget and pay off credit cards quickly. Another crucial thing was 74 per cent of doers reported that their parents showed them how to save and prepare for the future, compared with 64 per cent of dreamers.
“Parents have a tremendous influence on how financially responsible their children become,” said Carrie Braxdale, managing director of investment services for TD Ameritrade. The parents who are doers “have conversations with their children about money, the importance of saving money and putting it aside,” Braxdale said. “And parents actually model that good financial behaviour. They lead by example and their actions.”
The survey also shows that 83 per cent of doers have a retirement account, compared with 39 per cent of dreamers. “That’s pretty dramatic,” Braxdale added. “You show them the value of these actions, and then lead the way.”
So “doers” have a way of raising kids who will follow suit: Parental example overall has “a significant influence on respondents’ money-management skills as adults,” the survey concludes.
When kids hear positive and clear messages about money from parents, then the belief and guidance they have are accurate ‒ as opposed to them making childlike observations where they reach mistaken conclusions, said Susan Zimmerman, who operates Mindful Asset Planning with her husband in Apple Valley, Minnesota.
Zimmerman is a rare blend as a financial consultant because she is also a licensed marriage and family therapist, and knows the dynamics that shape a child’s behaviour with money. For parents wondering how to pass on financial wisdom, Zimmerman said it starts with the ABCs: “A is for allowance, where a child earns a certain amount for doing a job. B is for balance, where you tell kids that you don’t want to spend all of your money right away because there are things you want to save for. And C is for charity or contributions to causes the family cares about.”
The most important thing parents can do to teach their kids about money is not only to lead by example, but also to share what they are doing, Zimmerman said. Her advice is to ask kids where they think money comes from the next time you visit the ATM. “Of course the kids don’t get it,” she said. “It’s not an endless money machine, and that’s the start of a great conversation you can have with your kids.”
