At a time when the economy seems to be at the root of most conversations, Americans are facing a problem: Families aren’t comfortable discussing finances. While most Gen Zers and Millennials (79%) seek financial advice online, they are much less enthusiastic about discussing money with their family.
Parents and children are uncomfortable discussing the state of their finances with each other. They would even prefer to talk about controversial topics like world events and the upcoming 2024 presidential election rather than get into the weeds about savings, retirement and investments.
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U.S. Bank released its Challenging Conversations About Money report today, revealing that each generation of parents is getting better at increasing transparency around finances: 44% of parents report discussing investing in stocks and bonds with their children, compared to just 24% of Americans who recall their parents discussing investment practices.
However, this report still indicates less than half of parents actively teach their children about money and managing finances.
Removing the taboo of discussing money can set children and parents up for financial success
Discussing money is often seen as inappropriate or even taboo. Still, Jasmine Rashid, Author of the Financial Activist Playbook, argues that it is something we should all do more as the first step in financial activism. Rashid notes that talking about financial hardships can lessen the emotional burden and actually empower those struggling to address their finances head-on.
U.S. Bank’s research findings indicate the same: shame, guilt, and discomfort are often the reason why both parents, children, and spouses don’t openly discuss their finances. Millennials (63%) and women (59%) are the most likely to feel ashamed for asking for financial help.
However, initiating these conversations can yield long-term financial benefits. And the way families approach financial discussions varies based on age and gender.
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More than half of men (51%) discuss investment practices with their children, compared to one-third of women (31%). Moms are far more likely than dads to think it is part of their job as parents to set financial boundaries.
The lack of financial transparency is plaguing older children, too: 45% of millennials and 39% of Gen X are worried they’ll have to be financially responsible for their aging parents or in-laws, despite the fact that half of Americans don't know their parents' financial situation. Open conversations around money can help adult children of older parents with estate planning and caregiving needs. Such conversations can also set adolescents up for long-term financial success.
The good news is that certain aspects of finance are becoming less taboo: 65% of parents are comfortable having conversations with their children about career paths that will help them fulfill financial goals and college tuition costs.
Retirement plans such as 401(k)s and Roth IRAs (51%) are also more palpable for parents to discuss than investing in stocks and bonds (44%) and real estate (41%).
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How to instill positive financial habits
Children can adopt their parents' financial habits through learned behaviors, so it’s crucial that financial responsibility is modeled early on.
Tom Thiegs, a family wealth coach at Ascent Private Capital Management of U.S. Bank, notes the best ways for families to take a proactive approach to helping prepare children for the future.
“With average household debt steadily increasing in the past 20 years, it's essential to teach children how debt works, especially how interest accrues and the impact on credit scores,” he said.
Related: The average American faces one major 401(k) retirement dilemma
“The sooner young people get this foundational knowledge, the better they’ll be able to navigate the credit landscape while avoiding the trouble that comes with mismanaged debt. As young adults get credit cards, a car loan, or even a mortgage, their education in these areas gets more important and higher stakes,” he continued.
Non-housing debt doubled from $2.6 Trillion in 2008 to $4.9 Trillion in Q2 2024, and credit card balances reached $1.14 trillion this year. In a time when inflation is driving up consumer prices and credit card debt is piling up, it’s more important than ever for families to discuss finances openly.
Thiegs highlights that understanding the basics of financial products can lay a solid foundation for future financial plans.
“It’s a good idea to start teaching children financial concepts before the stakes are raised so you can make course corrections along the way,” he explained. “One nuance that many families don’t discuss is the difference between “good” debt and “bad” debt. Utilizing debt effectively can sometimes be a wealth-builder rather than a barrier to it, but this usually requires a strategic approach.”
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