Chances are your children will learn about money matters much differently than you did.
More than one-third of Americans adults today (35 percent) say no one taught them about investing, according to a new survey by RBC Wealth Management-U.S. and City National Bank (RBC/CNB).
But that experience doesn’t appear to be shared across generations.
Baby Boomers (age 55 and older) are the least likely to have had any sort of financial instruction, the survey found. In fact, 38 percent of Americans in this age group say no one taught them about investing. But for Millennials (ages 18 to 34), the experience is clearly different; only 29 percent say they grew up without any instruction on investing, while another two-thirds say they learned about investing from their parents, someone else, or in school.
What’s contributing to the generational shift?
"The combination of longer life spans and the elimination of the pension has created the need for people to self-fund their retirement for the first time in American history,” says Kirstin Turner, who oversees 65 financial advisors as the West Palm Beach complex director for RBC Wealth Management-U.S. “And the Internet and technology are making investing much easier and more mainstream than it was 50 years ago.”
The experience for future generations could be different still, given growing support for some sort of financial literacy curriculum for kids.
The vast majority of Americans (87 percent) think financial literacy is so important that it should be taught to kids in school, according to the RBC/CNB survey conducted in mid-March. According to data from the Council for Economic Education, that’s exactly what is starting to happen. The Council found that the number of states including economics in K-12 studies has increased in the last decade as has the number of states requiring high school personal finances to be offered or taken.
Research from Champlain College's Center for Financial Literacy suggests the quality of those efforts is indeed improving. In its 2015 National Report Card on State Efforts to Improve Financial Literacy in High Schools the Center for Financial Literacy gave 25 states a passing grade ( an A or B), up from 20 in 2013. In addition, fewer states (15) received a failing grade (a D or F) than in 2013 (22).
“This has definitely become a hot topic,” says Brooke McGeehan, a financial advisor with RBC Wealth Management-U.S. in New York. “We need to make sure we’re teaching our children about financial responsibility. They’re our future entrepreneurs, business leaders and educators.”
When to talk to kids about money
Money is a topic not often discussed at the family dinner table, but perhaps it should be.
Today, 83 percent of parents with kids between 16 and 22 say they think they’ve done a good job of teaching their kids about money, the RBC/CNB poll found.
However, that sentiment declines with the age of children. Among parents with kids 11 to 15, 78 percent say they’ve done a good job teaching them money skills, but 21 percent say they’ve either done a poor job or done nothing at all. And among parents with kids age five to 10, 30 percent say they’ve done a poor job or nothing.
“It’s never too early and it’s never too late to have a conversation with your minor about financial literacy,” says McGeehan, who already does so with her two children, ages six and three. “You just need to find a way to relate it to their world.”
Peter Mortimer, an RBC Wealth Management –U.S. financial advisor based in Oakbrook Terrace, Ill. agrees.
“Financial literacy is very important, but it’s a dicey subject,” Mortimer says. “You can discourage kids because it can look pretty scary and daunting, but realistically, you can’t put your head in the sand and ignore the importance of these issues.”
Stan Framburg of Naperville, Ill., is from a family that took a proactive approach to financial literacy, so he does the same with his children. When his three children turned 13, he took them to meet his financial advisor (Mortimer). His mother did the same with him, and he found it to be an invaluable lesson.
“If you’re old enough to spend money, you’re old enough to save money,’ ” Framburg says he told his sons, now 23 and 21, and daughter, 20. “I always had really good intentions about trying to instill in my kids that saving is something important.”
RBC Wealth Management-U.S. suggests some ways parents can talk to their children about complex financial topics:
Discuss with kids as young as age six the basics of where money comes from and what to do with it. Associate allowance with accomplishments, such as doing a good job with household chores; make non-essential purchases personal; and encourage work outside the home, such as lawn work for neighbors.
Talk to teenagers about smart money management. Take your teen grocery shopping to show how much things cost; discuss how to budget for the family’s next major expense, such as a vacation; show how to read electricity and water bills; and note the consequences of overspending.
Review bank and credit card statements; explain how checking accounts work; go over various savings and investment options; show how interest works using financial calculators.
In addition, RBC Wealth Management-U.S. has created a variety of financial literacy educational materials, such as the Money-Savvy Kids Worksheet and Discussing College Funding with Your Teen, which are available on the company’s website.
ABCs of financial literacy
Of the 87 percent of Americans who think financial literacy should be taught in the classroom, 15 percent say classes should start as early as elementary school. The rest say it should be taught in middle and high school.
Last fall, Turner and her husband, RBC Wealth Management-U.S. financial advisor Telby Turner taught an eight-week money skills class -- everything from budgeting and buying a car to credit cards and interest rates -- to 60 football players at William T. Dwyer High School in Palm Beach Gardens, Fla.
Turner says she was amazed at the impact the sessions have and she and her husband plan to offer part two this fall and maybe add another high school.
“They’re sponges, and no one ever talked with them,” Turner says.
Room for improvement
Overall, the RBC Wealth Management-U.S. survey shows some worrying trends when it comes to financial literacy.
Regardless of age, more women (43 percent) than men (26 percent) says no one taught them about investing. In addition, fewer women say they learned about investing from their parents (17 percent) or in school (11 percent) than men (21 percent and 16 percent, respectively).
Kirstin Turner is trying to narrow the gender gap.
She hosted a five-hour Women’s Investment Forum in February 2015 in West Palm Beach, Fla., for about 130 women. She has a second one planned for May 4 in St. Petersburg.
“We talk about why it’s so important for women to have a seat at the table about their financial life,” Turner says. “I have some women … who say ‘My husband just died and I have no idea what we own. I don’t even know if we own our house.’ ”