NEW YORK (MainStreet) —More parents are regularly saving for a family vacation than for their children’s college education. And forget retirement. Fully one-half of you aren’t even saving for your own future.
Those are the bleak results of a just-released survey conducted by the investment management firm T. Rowe Price. The Parents, Kids & Money Survey reveals that Mom and Dad just aren’t getting the job done when it comes to setting up their family for long-term financial success.
"Kids look to their parents as financial role models, and for that reason parents need to not only have frequent discussions with their kids about money, but also lead by example,” says Stuart Ritter, CFP and senior financial planner at T. Rowe Price. He is also the father of three young kids.
“Parents could do better on two fronts,” Ritter adds. “They need to share financial concepts with their kids like goal setting and smart saving, as well as prepare their own finances for the long term. We found this year that more parents are saving for short-term goals such as vacation, than for long-term goals like college." Kids, by the same token, are also focused on short-term goals, with only 24% saying they are saving their own money for long-term goals. Parents need to focus more on long-term financial planning in order to prepare for a secure future for the whole family, Ritter says.Also see: Student Debt Becoming More of a Family Problem
Highlights from the survey of 1,014 parents and 839 kids ages 8 to 14 include:
- Hope is not a strategy. Half of parents surveyed do not save regularly for retirement (50%). Additionally, many parents do not maintain an emergency fund for unexpected expenses (42%), do not have life insurance (54%), and do not have an up-to-date will (74%).
- We’ll talk about that later. A large majority of parents (73%) report they are having regular conversations with their kids about money, but the conversations revolve around short-term financial topics like back-to-school shopping (62%) rather than long-term planning such as family savings goals (39%). Additionally, 14% of parents say they discourage kids from talking about money altogether.
- Going to college is important, but what about Walley World? Kids (70%) and parents (66%) agree that the best way to prepare for a strong financial future is with a good education, but only 41% of parents are regularly saving for college for their kids. In fact, more parents (46%) save regularly for vacation than for college, although 59% have talked to their kids about how to pay for college.
- Short-term savings for kids: here today, gone tomorrow. While 25% of kids save their money for long-term goals, 63% save their money for short-term goals. Additionally, 25% of kids say they spend their money right away on things for which they were not saving.
- Don’t worry, Dad. I’m going to win American Idol. Today's kids will likely need well over a million dollars for a secure retirement, given the growth of inflation, but are unrealistic about how to get there. Only 21% believe the most likely way to obtain a million dollars is to invest in stocks and bonds. 24% believe the most likely way to gain a million dollars is by becoming famous.
- Hey kids, guess who’s moving in! 84% of kids think they will be financially independent from parents between ages 18 and 25. Yet 18% of parents believe their kids will need to support them in retirement.