Fact File: Parents, kids and money survey

FACT FILE

PARENTS WHO MISMANAGE MONEY ARE MORE RELUCTANT TO DISCUSS MONEY WITH KIDS – US SURVEY

A SURVEY carried out in the United States at the beginning of last year found that families who try to “keep up with the Joneses” are more reluctant to have money conversations with their children and are more likely to have risky financial behaviours. Overall, many parents reported having some reluctance discussing financial topics with their kids. The 12th annual Parents, Kids & Money Survey by investment house T Rowe Price sampled more than 2 000 parents of 8-year-olds to 14-year-olds.

“Discussing money with kids is particularly important in the midst of the coronavirus pandemic, when many families have been affected – from smaller consequences like a cancelled vacation to a parent who has lost a job,” says Roger Young, a senior financial planner at T Rowe Price.

THE SURVEY FOUND THE FOLLOWING:

♦ Keeping up with the Joneses: 35% of parents surveyed said they are always trying to “keep up with the Joneses.” Of those, 53% said they hide purchases from their spouses, 60% have a budget but rarely follow it, 59% rely on credit cards to cover monthly expenses, and 72% live pay-cheque to paycheque.

♦ More likely to pull from retirement savings: those trying to keep up with the Joneses were three times more likely to have taken money from their retirement savings at least twice during the past two years.

♦ More reluctant to discuss money matters with their kids: parents trying to keep up with the Joneses were more reluctant than their counterparts (62% vs 30%) to discuss financial topics with their kids.

Although the majority of parents surveyed agreed that it’s important to have discussions with their kids about saving money and spending money (85%), setting financial goals (80%), and family finances (50%) and they agreed that such discussions make a difference (60%), many respondents (41%) said they have some reluctance to discuss money matters, and only 22% of parents follow T Rowe Price’s recommendation to discuss money matters at least weekly.

♦ Kids follow their parents’ spending examples: 71% of parents trying to keep up with the Joneses said their kids usually spend most of their allowance right away, compared with 40% of their counterparts.

♦ Parents think schools should play a role: 40% of parents said they would rather have their child take a finance class versus teaching them themselves, and 66% said they wished they had received more financial education at school.

FINANCIAL LITERACY IN SOUTH AFRICA

In a 2017 study by the Human Sciences Research Council, commissioned by the Financial Sector Conduct Authority, South Africans scored an average of 54 points out of 100 on a financial literacy scale. As would be expected, there was a correlation between education level and financial literacy score. People with a primary school education only scored 50 points; those who had completed their secondary education scored 58 points, while those who had a tertiary education scored 67 points.

“The future of financial literacy in South Africa is the youth and the focus of existing and future literacy interventions must prioritise this age cohort. Financial education is an enabler and can give young people opportunities to grow businesses and better navigate the labour market,” the authors of the report, Benjamin Roberts, Jarè Struwig, Steven Gordon and Thobeka Radebe, wrote.