Sound advice is often lacking

Mother may not always know best when it comes to imparting accurate and helpful financial knowledge to her children. The same notion appears to be true for dear old Dad’s advice.

A number of recent surveys documenting the lack of parental financial knowledge including an extensive survey by the National Financial Educators Council document that an alarming number of American parents cannot teach what financial experts consider to be good money habits or information to their kids.

The Council, based in Las Vegas, offers a basic online financial literacy test on its website. Of the more than 53,000 adult Americans that have taken it – the bulk of which indicated they are parents – nearly 60 percent received a failing score.

The Council calls the financial illiteracy of America’s adults an “epidemic” that “threatens to undermine people’s lives.”

That includes the kids of financially illiterate parents; kids who financial advisors say might not be able to avoid their parent’s mistakes without educational intervention.

Alyssa Phillips is the chief operating officer at HCR Wealth Advisors in Los Angeles, California.

She believes adult financial literacy – especially that of parents – is important because they all too often are the source of financial education and literacy for their children.

“Financially illiterate adults can teach the wrong skills to children resulting in a fragile foundation upon which they will manage money,” Phillips said. “This can become a detrimental self-fulfilling cycle where generation after generation lack the financial literacy to manage money effectively.”

Statistics prove that financial illiteracy is passed from the older generation to the next generation. The Council also reports that 40 percent of respondents with low financial literacy scores indicated they relied mostly on parents to guide money decisions, as per statistics gathered by the National Bureau of Economic Research. Only 20 percent of respondents with high financial literacy scores told researchers that parents were their primary source for guidance.

Clearly the financial experiences of parents may not be enough to prepare children for better fiscal outcomes in their adult lives.

Schools have taken some lead in teaching youth about money matters, but as the American education system struggles to reopen during the COVID-19 pandemic, other sources are stepping in to help fill the gap that parents cannot.

For instance, in the Peach State, the Credit Union of Georgia (CUG) and the LGE (Lockhead Georgia Employees) Credit Union used the heralding of 2021 to pump new lifeblood into financial literacy programs for youth and adults in an effort to encourage parents to improve their money knowledge and that of their kids.

“Many of our mistakes when it comes to finances are avoidable, we just need to be taught the skills,” wrote Cory Sekine Pettite, editor of the Cobb In Focus website, in a Jan. 11, 2021 post highlighting programs from both credit unions. “This may sound daunting, but it really isn’t. You can break the cycle of financial illiteracy with your children. There’s no shame in seeking outside support. In fact, you should.”

That’s what is happening via online programs created during the pandemic lockdowns and offered by CUG and LGE.

At CUG, an online savings club for kids combined with Zoom-style educational programming covering topics such as credit reports, budgeting, and car and home buying are offered.

That’s the type of educational content – content that is aimed at kids and teens – that David Benning, a managing partner at Logan Park Wealth Management in Minneapolis, Minnesota, would like to see more of.

“Unfortunately, the decisions we make in our late teens and early twenties can have either a profound positive or negative impact on life for decades. Young people are tasked with making critical decisions around student loans, consumer credit, and early savings rates without even rudimentary training or education,” said Benning. “.Individuals and society would benefit greatly if we provided early, practical education to teens and young adults so they could navigate an increasingly complex financial landscape.”

Despite the daunting stats, there is a glimmer of hope: There appears to be a collective move on the part of parents to swing the financial literacy situation in a more enlightened direction.

As reported on MSN’s “Buzz60,” 68 percent of parents surveyed by One Poll on behalf of Chase, indicate they have “had the money talk” with their kids. One Poll interviewed 2,000 American parents of kids ages eight to 14 and discovered that 83 percent of those parents said they wish they had received more financial information when growing up. Thus, this survey and its snapshot of American parents documented that parents are taking intentional steps toward improving their financial communication with the children by doing the following: helping kids save for a goal (70 percent); providing allowance based on completing chores (37 percent) and teaching kids to track their own spending (23 percent).

“Financial literacy improves the foundation on which young teenagers will begin to build their own personal views about money,” said Phillips. “With a higher degree of financial literacy, they can build better habits and behaviors to use for the rest of their lives.”