Why families hide worries and miss windows
While the survey didn’t unpack why financially stressed parents hide their concerns from their kids, D’Angelo says that it could stem from a natural and human desire to protect one’s children. The stress that’s making a parent more anxious is something they don’t want their kids to feel. The survey found, however, that those kids still find out about money stresses, often through unspoken clues. On the other hand, children from families who have open conversations about money had far better comprehension of basic financial concepts like banking, credit payments, and financial well-being. Across a survey of 1,000 families, that understanding among children of families who talked about money was roughly three times stronger than among those who didn’t.
While open conversations about money leading to better financial literacy among kids may be pretty intuitive, the survey also found that the age when kids learn about money matters a great deal. The survey found that parents often open money conversations between ages 15 and 18, when kids might be taking on a part-time job, preparing for post-secondary education, or starting to incur major expenses. However, it also found that between ages 10 and 14 is when most kids’ curiosity about money peaks. It’s in those younger, more formative, years when certain key understandings about money as well as emotional relationships with money can be forged. While D’Angelo notes that it might be challenging for some parents to start talking about money with their kids at those ages, the survey found that if information isn’t provided anxiety will fill the gap.
What advisors can do to help
D’Angelo likens a financial literacy education to learning math or languages: you have to start with the basics, build foundations, and go from there. Many of those foundations can be built in the home, but he believes that classroom programs can help a great deal as well. He notes that Vanguard’s my classroom economy program is designed to run from kindergarten through grade 12. As concepts grow more complex and technical, advisors can start to offer expertise. D’Angelo, himself a former advisor, recalls being brought into family discussions about securities and investing. Where parents’ knowledge about the bond market, equities, or prudent financial planning ends they can lean on their advisor to educate their kids.
D’Angelo believes that there’s a business incentive for advisors to help educate clients’ kids as well. The intergenerational wealth transfer is well underway, and advisors have a harder time connecting with their clients’ children when those children are in their 30s or 40s. By investing their time in educating those children, advisors can create a trusted, deep relationship with the family which can, in turn, inform better financial decisions and more resilient estate plans down the road.
“The data shows that there’s a big opportunity in childhood financial literacy. We have our program because parents can’t do it all. The teachers are trying, and hopefully more and more do. But I think the takeaway for advisors is that there’s an opportunity,” D’Angelo says. “So explore what could be possible and see if that can be an element of engaging at a deeper level, beyond just investments.”