Talk to Your Kids About
Money
Published
October 13, 2014
Forget
the stereotype about today’s young adults being “slackers.” It turns out,
a significant portion of so-called “Millennials” (born 1980-1989) worry about
financial issues on a regular basis. Half say they have started saving for
retirement- a far cry from the financial nonchalance displayed at the same
stage in life by their parents’ generation.
As a
follow-up to earlier research about how Baby Boomer parents and their adult
children are- or are not- communicating about financial issues, Fidelity
Investments conducted a second survey to “drill down” deeper. The goal:
to find out what (financially-speaking) keeps so-called “Millennials,” a.k.a.
Generation-Y, up at night. One of the most surprising
revelations? “This survey busted the misconception that retirement
is not a priority for Millennials and too far into the future to begin
saving for,“ says Fidelity senior vice president Lauren Brouhard.
Fifty-two percent said that accumulating more for retirement is one of their
top financial goals, along with paying off student loans and credit card debt.
While one
out of four young adults says they don’t trust anyone when it comes to
financial advice, a 33% cite their parents as their most trusted source of
advice about money, a somewhat surprising finding given the free-spending
reputation of the Boomers.
Speak to
Me!
It turns
out, although the Baby Boom generation has done a lot of things differently
than their parents- especially in terms of child-rearing- many still resemble
grandma and grandpa in their attitude about talking to the kids about
money. It remains a taboo topic in many families.
However,
according to Fidelity’s research, 39% of their adult children worry about money
at least once a week and are also “very engaged in this topic with their
peers.” The main complaint their kids have? That mom and dad are
not opening up on the subject. While three-fourths of Gen-Ys say they
don’t have any difficulty starting a conversation with their parents
about money-related issues, roughly half feel they are not receiving any
meaningful advice.
The
message for parents? “Your children are looking to you for help,” says
Brouhard, “but don’t feel they are getting it.” She adds that while
“parents prefer to wait until they retire, [their] adult children prefer to
have this discussion earlier. They want more information. There’s a
lot that the different generations can learn from each other.”
For
instance, consider the issue of saving for retirement. Perhaps your son
or daughter is looking for guidance about what percent of their paycheck they
should contribute to their 401(k). Or how to invest it. That
might not be something some Boomer parents feel they know much about.
After all, given the number of Boomers reaching their 50s and 60s with
shockingly little saved for retirement, their most commonly cited plan for
funding this stage in life has become “work longer.”
Where Has
The Money Gone?
And,
let’s face it, much of that spending baby boomers were doing in their 30s, 40s
and 50s benefited their children. We can all think of
parents who doled out thousands of dollars on special sports equipment (do you
have any idea what hockey pads, skates, and a helmet cost?!), dance lessons,
$400 prom dresses (worn once), the car “required” at age 16, etc. Not to
mention moving to a larger home (with higher property taxes) so the kids could
be in a “better” school district (that coincidentally has a winning football
team). And, when did spending your senior year spring break in France
become popular?
When I
grew up (full disclosure: I am a Baby Boomer), many parents felt a
responsibility to contribute what they could to help cover a 4-year college
education. But these days more and more parents feel obligated to
pay for graduate school. There has been a great deal of
attention paid to the crushing burden of student loan debt college graduates
are left with, but when have you heard about the student loans parents are
struggling to pay down in their 60s and later? (More on this next week.)
The Price
of Being a Soccer Mom (or Dad)
Most
damaging of all to mom and dad’s retirement security? One stay-at-home
parent-typically mom. This was necessary in order to provide
transportation to the kids’ after-school commitments- sports matches, music
lessons, swim meets, regional competitions, etc., etc., etc.
The
average Baby Boom woman took 11 years out of the [paid] workforce for family
caregiving. For some, that time was used to help older relatives, such as
parents. But the lions’ share was spent on childcare. And, for
many, it lasted far beyond the age that their kids were in elementary
school.
I’m not
suggesting this is a “good” or a “bad” thing. Just pointing out that it
has a price tag: significantly less saved for retirement and much smaller
Social Security benefits.
Teach
Your Children Well
Brouhard
maintains that whether parents feel they’ve done a good job managing their own
finances or not, there are still lessons they can share with their young adult
children- even if it’s in the form of what not to do. “If
parents did a lousy job in saving for retirement, they can use themselves as an
example and encourage their children not to follow in their footsteps, to be
more committed to saving.” She urges parents to “share their experiences
and open up a family conversation to help both their children and themselves.”
This
includes intergenerational issues, such as how mom and dad plan to pay for
their retirement, the structure of their estate plan, their potential health
care needs and what they expect in terms of elder care. As Brouard points
out, “These will impact the lives and decisions of children.”
For
instance, knowing that mom and dad prefer to age in their own home as opposed
to a retirement community might influence whether a son or daughter accepts a
job in another state or chooses to remain close by in order to help. If
your daughter or son would like to return to work full-time but can’t afford
child care, that could affect grandma and grandpa’s decision to spend the
winter in a warmer climate.
According
to Brouhard, “When families open these conversations, it increases peace of
mind. [There are] better long-term financial outcomes because families
are talking about issues that ultimately impact each other.”
The
Advantage of Starting Early
According
Brouhard, “The message seems to be getting through that [Millennials] need to
think about long-term saving because they won’t have the same benefits past
generations have had in terms of pensions and healthcare. They will have more
personal accountability. They need to get in the game, save more and invest for
long-term growth.”
Her
advice to Millennials: “If you are overwhelmed or intimidated [about money]
there are professional services available to get you started.” This
includes a special section on Fidelity’s website dedicated to this generation- https://mymoney.fidelity.com/content
.
.
“This is
a call-for-action for this generation to make the time to prepare for the life
they want to live. They have the gift of time.”
Ms. Buckner
is a Retirement and Financial Planning Specialist and an instructor in Franklin
Templeton Investments' global Academy. The views expressed in this article are
only those of Ms. Buckner or the individual commentator identified therein, and
are not necessarily the views of Franklin Templeton Investments, which has not
reviewed, and is not responsible for, the content.
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