BALTIMORE, July 7, 2020 /PRNewswire/ -- As many families
navigate financial hardship and stress brought on by the pandemic,
T. Rowe Price advises parents to
discuss potential money challenges with kids during this difficult
time. The firm's research shows that kids are astute observers of
family financial dynamics, often detecting when there is financial
stress. In the absence of guidance from their parents, kids are
left to form their own conclusions about the drivers of financial
stress and what it means for their family.
The firm's 2020 Parents, Kids & Money Survey looked at the
impact of financial stress on families prior to the pandemic. Among
parents who had declared bankruptcy, kids who are aware of their
parents' bankruptcy are more likely to rate their own financial
habits as excellent or very good compared with those who are
unaware (84% versus 34%). The survey sampled 2,030 parents of 8- to
14-year-olds and their kids.
Parents facing unforeseen events such as furloughs, pay
reductions, business closures, and falling asset values should
consider discussing with their kids the impact on the family's
finances. This will help kids better understand changes to spending
habits and future plans, including education.
T. Rowe Price's 2018 Parents,
Kids & Money Survey found that money conversations with
parents are associated with better financial habits in adulthood.
Young adults who discussed money with their parents are:
- More likely to have a budget (88% versus 73%)
- More likely to have an emergency fund (60% versus 43%)
- More likely to put 10% or more of their income toward savings
(66% versus 48%)
- More likely to have a retirement account (56% versus 36%)
To help parents discuss money with their children, T.
Rowe Price created the Money
Confident
Kids® program, which
teaches families to have conversations around planning for the long
term by focusing on financial concepts such as goal-setting,
inflation, asset allocation, and investment diversification.
The economic fallout of the coronavirus makes money
conversations more important than ever
Regardless of whether parents are under financial stress, the
novel coronavirus offers an opportunity for parents to broach
financial subjects with kids such as the importance of emergency
funds, manageable levels of debt, the concept of financial
flexibility, and how to keep fixed expenses down. The current
situation helps kids put "what if" events into context and can make
abstract money concepts understandable.
Kids are watching parents and how they manage money
More than 90% of kids perceive their parents' financial habits
as good, very good, or excellent, and 62% said the conversations
they have with their parents about finances makes a difference,
according to T. Rowe Price's 2020
Parents, Kids & Money Survey. Whether kids' perceptions about
how well the family is doing financially are accurate, kids
appreciate financial honesty.
Parents don't have to be money experts to teach financial
education
While parents' confidence about talking to their kids about
money management is low—only about 26% of parents felt they were
extremely knowledgeable about managing expenses—data from T.
Rowe Price's 2020 Parents Kids &
Money Survey show that parents don't have to be money experts in
order to teach their kids financial education. About 41% of parents
are reluctant to discuss financial matters with their kids, but
kids still see parents as their primary teacher of good financial
planning. According to last year's survey, more
than half of kids said they wish their parents taught them more
about money.
QUOTE
Roger Young, vice president and
senior financial planner, T. Rowe
Price
"While many families are grappling with
financial unknowns, parents should remember that their kids may be
picking up on unspoken cues about money and the family's situation.
We know that many parents are reluctant to discuss money matters
with their kids. But we also know that kids are better positioned
for financial responsibility if their parents do discuss money with
them. It may be particularly difficult to have these conversations
now amid the economic fallout of the coronavirus, but it's more
important than ever to be transparent with kids."
ABOUT T. ROWE PRICE
Founded in 1937, Baltimore-based
T. Rowe Price Group, Inc. (NASDAQ-GS: TROW), is a
global investment management organization with $1.19 trillion in assets under management as of
May 31, 2020. The organization
provides a broad array of mutual funds, subadvisory services, and
separate account management for individual and institutional
investors, retirement plans, and financial intermediaries. The
company also offers a variety of sophisticated investment planning
and guidance tools. T. Rowe Price's disciplined,
risk-aware investment approach focuses on diversification, style
consistency, and fundamental research. For more information, visit
troweprice.com.
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SOURCE T. Rowe Price Group, Inc.