Schwab ''Parents & Money'' Survey Offers Prescription for Raising Financially Healthy Kids
Findings Also Encourage Parents to Assess Their Own Financial
Health
SAN FRANCISCO--(Business Wire)--
Asked to select topics they wish they had learned more about when
they were teenagers, the greatest percentage of today's parents with
teens (57 percent) choose "money management." Surprisingly, most
parents admit to raising children who may someday share the same
regret. These are among the key findings of "Parents & Money," the
latest annual survey on the topic of families and money released today
by Charles Schwab.
Sixty percent of parents identify their teens as "quick spenders,"
and most acknowledge they could do a better job of teaching and
preparing their kids for the financial challenges of adulthood,
including budgeting, saving and investing. Only about one in three (34
percent) has taught their teen how to balance a checkbook, and even
fewer (29 percent) have explained how credit card interest and fees
work.
And while most agree that the best way for teens to learn about
money is from guided, hands-on experience or their own example (71
percent), only one in five parents (20 percent) involves their teen to
a great extent in the family's budgeting and spending decisions. A
full 25 percent don't involve their teens in these important
activities at all. In fact, parents are much more apt to teach their
kids how to do laundry (70 percent) than how to pay bills (43
percent).
"Parents prepare their kids for so many of life's milestones --
hitting puberty, getting a driver's license, choosing a college," said
Carrie Schwab-Pomerantz, Schwab's chief strategist of consumer
education and president of Charles Schwab Foundation. "But this year's
survey shows that they may be missing opportunities to prepare their
teens for important financial milestones like managing an allowance,
getting their first job, getting a credit card or buying a car."
Parents are worried, but not acting on their fears
Nearly all (93 percent) American parents with teens age 13-18
worry their teens might make financial missteps such as: overspending
or living beyond their means (67 percent), getting in over their head
with credit card debt (65 percent), failing to save for emergencies
(60 percent) or failing to stick to a budget (57 percent). And a full
third of parents (33 percent) anticipate their "golden years" will
likely involve helping their kids financially.
Their fears may be well-founded. While the majority of parents
consider learning about budgeting (63 percent) and credit card
management (55 percent) to be more important for today's teens (than
when they themselves were young), far fewer claim to have taught their
children these basics (49 percent and 29 percent, respectively).
One barrier may be the misconception that teens aren't interested
in learning about personal finance. More than two-thirds of parents
(67 percent) think that learning about money management, including
budgeting, saving and investing, is not one of their teen's top
priorities. However, previous research shows otherwise: 60 percent of
American teens identified it as a top priority in Schwab's 2007 Teens
& Money Survey.
Parents may need coaching, too
Although three-quarters of parents (75 percent) consider
themselves good financial role models for their teens, the data
suggest otherwise. The majority of parents surveyed characterize
themselves as "quick spenders" vs. "stellar savers" (52 percent vs. 48
percent). More than one in four parents surveyed (28 percent) are not
currently saving for either their own retirement or for their child's
college education.
Even more troubling is the fact that half (50 percent) of all
parents think their teens will need to have less than $500,000 saved
to retire by age 65, including 38 percent who believe their teens will
need to have less than $200,000 saved. To put this in perspective,
according to the Schwab Center for Financial Research, someone about
to retire should have roughly 25 times his or her last year's working
income saved in order to sustain an adequate level of income
throughout retirement. In other words, in order to generate annual
retirement income of $44,000(1) that keeps pace with inflation and
lasts for an expected 30-year retirement, a moderate investor would
need to have approximately $1.1 million socked away.(2)
And while investing is also cited by almost half (49 percent) of
parents as more important for today's youth to learn about than it was
a generation ago, few are teaching their kids about it. Nearly all
parents (97 percent) believe it's important to teach their teens to
save and invest for retirement and almost half (48 percent) worry that
their kids won't start saving soon enough, yet only 19 percent have
taught their teens how to invest money to make it grow and even fewer
(14 percent) have taught them what a 401(k) plan is. This isn't
surprising given that more than two-thirds of parents (69 percent)
admit to feeling less prepared to give their teens advice and guidance
about investing than they do the "birds and the bees."
"The research points to some key opportunities for parents -- even
for those who may feel insecure or ambivalent about giving financial
advice themselves," said Kristine Dixon, director of consumer
education at Schwab. "Our website, www.schwabmoneywise.com, is a great
resource to guide family discussions about money and encourage good
financial habits," she added. "And the process of teaching someone
else almost always offers the added benefit of helping us learn more
ourselves."
Tips for raising financially fit teens
Parents don't have to be financial whizzes themselves -- or even
perfect financial role models -- to raise financially fit teens. Here
are some practical ways for any parent to get started:
1. Include your teen in discussions about the household finances.
Make discussion about the household finances a regular part of
everyday life. The majority of today's parents wish they'd known more
about money management when they were teens. Break the cycle of
ignorance by taking a page out of the single parent's handbook. Single
parents are 44 percent more likely than married parents to regularly
involve their kids in household financial decisions. Current events in
the economy provide additional opportunities for family discussion.
2. Be prepared for your teen's financial rites-of-passage. Whether
it's a first job, saving for a car, using a credit card, or saving for
college, real-life events provide opportunities to bring basic
financial concepts to life. All teens experience money milestones that
offer an invitation for parents to share their own values and talk
about money management in a way that's compelling to kids. The
website, www.schwabmoneywise.com, can help you identify your teen's
next financial milestone and capitalize on that opportunity.
3. Provide your teen with an allowance and stick to it. An
allowance gives kids the ability to learn how to make choices --
sometimes at the expense of making mistakes. Don't give teens more
money just because they ask for it. Teens whose parents describe them
as "stellar savers" actually get on average $30 less per month than
teens who are "quick spenders." If you increase your teen's allowance,
demand greater accountability by requiring him or her to pay for some
basic necessities.
4. Encourage your teen to get a part-time or summer job. Teens who
have paying jobs are 40 percent more likely than kids who don't to be
"stellar savers" rather than "quick spenders." Even working just a few
hours a week or during summer breaks can give kids the important
practical experience of managing their own money. Only one-third of
parents (33 percent) say their teens have a paying job.
5. Teach your teen how to use financial tools like checkbooks and
credit cards. Almost a third of parents (30 percent) say their teens
don't have any type of savings, checking or other financial account.
While your kids are still under your roof, you can teach them how to
use a credit card wisely, and the importance of balancing a checkbook
and checking a bank statement. These are exercises that will help them
learn how to live within their means.
6. Help them make saving an automatic part of their lives. Teach
them that regular saving should be as automatic as brushing their
teeth. Consider providing an incentive by "matching" the money they
put into savings themselves with some amount -- perhaps 25 cents on
the dollar. Sixty-one percent of parents feel they could do a better
job teaching their teens about saving.
7. Show them the money. If you participate in a retirement plan,
like a 401(k) or IRA, talk about what a great vehicle it can be to
make money grow. If you feel comfortable doing so, you can even
consider showing them your own account statements to help them
understand the power of compound growth over time.
About the Parents & Money Survey
The Parents & Money survey was conducted by Kelton Research, a
research consulting firm, on behalf of Schwab. The
nationally-representative online survey polled 1,000 American parents
with teens between the ages of 13-18 to better understand their views,
behavior and knowledge of spending, saving, borrowing, and earning
money. The survey findings have a margin of error of plus or minus 3
percentage points at the 95 percent confidence level. A detailed fact
sheet on the survey can be found at
http://www.aboutschwab.com/community/financial-literacy/index.html
About Charles Schwab
The Charles Schwab Corporation (Nasdaq:SCHW) is a leading provider
of financial services, with more than 300 offices and 7.1 million
client brokerage accounts, 1.3 million corporate retirement plan
participants, 302,000 banking accounts, and $1.4 trillion in client
assets. Through its operating subsidiaries, the company provides a
full range of securities brokerage, banking, money management and
financial advisory services to individual investors and independent
investment advisors. Its broker-dealer subsidiary, Charles Schwab &
Co., Inc. (member SIPC, http://www.sipc.org), and affiliates offer a
complete range of investment services and products including an
extensive selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
referrals to independent fee-based investment advisors; and custodial,
operational and trading support for independent, fee-based investment
advisors through its Schwab Institutional division. The Charles Schwab
Bank (member FDIC) provides banking and mortgage services and
products. More information is available at www.schwab.com.
Charles Schwab Foundation is a private, nonprofit organization
funded by the Charles Schwab Corporation. Its mission is to give back
to the community by supporting employee-selected causes and fostering
financial literacy through funding, involvement and expertise. More
information is available at www.aboutschwab.com/community. (0308-5254)
(1) The median U.S. income, according to the U.S. Census Bureau,
2004.
(2) This translates into a withdrawal rate of roughly 4 percent of
the portfolio's value in the first year of retirement, which is then
grown for inflation over the rest of the retirement time horizon.
Charles Schwab
Sarah Bulgatz, 415-636-5940
sarah.bulgatz@schwab.com
or
CRT/tanaka
Marcy J. Walsh, 310-659-5380
mwalsh@crt-tanaka.com
Copyright Business Wire 2008
