Study Says Parents to Blame for Kids’ Misspent Youth

More kids are getting into financial trouble--and their parents are largely to blame, according to a survey aimed at determining how parents teach their kids about money.

Parents try to teach their kids to do the right things with their finances, such as save and give to charity, but adults often set a bad example by overspending and living in debt, said Dallas Salisbury, chairman and chief executive of the Employee Benefit Research Institute in Washington, at a press briefing on the study’s findings.

Unfortunately, Salisbury said, kids learn more from example than talk.

“The most compelling finding in the survey is the tremendous proportion of adults that do not pay off their credit card balances regularly,” he said. “The impact of that example on their children is that 25% [of kids age 6 to 17] have credit cards and 25% of those who have a credit card do not pay off the balance each month.”

A separate study released by the California Public Interest Research Group earlier this month indicated that the problems become more severe by the time kids reach college age. Almost half of college students with credit cards have paid a fee for late payment, and 7% have had a credit card canceled because of late payments, according to the research group.

Both surveys, released to correspond with Financial Literacy for Youth Month, underscore the importance of teaching kids about money from a young age, experts say.

“Shopping at the mall, dining out, planning the family vacation all provide opportunities to teach children about comparison shopping and the value of money,” said Madeleine d’Ambrosio, executive director of the TIAA-CREF Institute, which financed the study. “Education is the key.”

Some of the survey findings:

* Although 97% of parents feel they understand financial matters very or fairly well, more than a third would tell their children to invest long-term money in fixed-income accounts--advice that’s at odds with what most financial planners suggest.

* Most parents rank their financial management skills highly, but only 38% pay off their credit card debt each month. The rest leave a revolving balance.

In an effort to improve the situation, a bill was introduced in the U.S. House earlier this year to provide state grants to create youth financial education programs in elementary and secondary schools. HR 61 also would create a national clearinghouse for instructional materials and the best practices in teaching financial literacy. Many Web sites also are devoted to financial education.

Yet books, lesson plans and Internet-based tools won’t get you very far if you don’t practice what you preach, Salisbury said.

“Every single thing that each of us does as an adult is being watched, being absorbed and being learned [by children],” he said. “Parents underestimate the influence of their behavior.”

Think about the things that you do and say, when it comes to money, added Janet Bodnar, author of “Dollars & Sense for Kids” (Kiplinger Books, 1999) and author of a weekly kids-and-money column called Ask Dr. Tightwad.

“What we know from these surveys is that kids depend on their parents for financial advice,” she adds. “And, it’s a question of what you do, not necessarily what you say. So you better shape up.”

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Parents, Kids & Money

When it comes to teaching their kids about money, parents often say one thing and do another, according to a new survey.

The good news:

* 92% of parents say they are “very” or “somewhat” effective at providing their children with financial guidance.

* 97% of parents feel they understand financial matters “very well” or “fairly well.”

* 83% of parents compare prices when they shop.

* 80% save some money regularly.

*

The bad news:

* Just 45% say they make a budget and stick to it.

* Only 38% pay off their credit cards each month.

* 12% have nothing saved in a retirement savings plan

* 11% have no personal savings other than what’s in their retirement plan.

Note: Survey of 1,000 adults, who have primary responsibility for one or more children between the ages of 6 and 17, conducted in January. The margin of error is three percentage points.

Sources: Employee Benefit Research Institute and the American Savings Education Council.