Aug 24, 2017 3 min read

It is not surprising children learn many habits from their parents. One area where this is very common is how they deal with financial issues. Asset management firm T. Rowe Price recently completed a survey and found out if parents carried a large credit card balance, their millennial children probably do the same. Half of these children carry a balance of $5,000 or more. Not surprising, these same children expected their parents to buy them whatever they wanted while growing up. They did not feel it was necessary to save up cash to make a purchase when you had a credit card.

A spokesperson for T. Rowe Price said, “We know that kids’ money habits are formed before they get to high school and that their parents are often their most influential teachers.” Children often imitate what they see others doing. Parents with better financial habits seem to discuss these issues with their younger children more than parents with poorer financial management skills.

Children need to be exposed about the family situation and how decisions are made. Maybe you plan to got to the beach instead of Disney World because of the cost. If you try to keep up with the Joneses when you can’t afford to, there will be consequences. Children need to understand this.

Giving them an allowance at an early age and making them save some to make a bigger purchase can be a valuable life lesson. Give them an idea about how much income a home must have to support basic necessities. Show them how much money things like cell phone plans and cable television cost. They probably will think life would end without these two things, but all baby boomers know we grew up without either and we still survived.

It is never too late to de velop better financial habits. Studies have found that parents with poor financial planning are almost twice more likely to pull money out of retirements accounts early than parents with better financial management. This can have a huge effect on retirement. those who take early withdrawals may have to pay a tax penalty, do not have the principal available during retirement and also lose the investment growth. Financial decisions made today do have consequences in the future. Short-term satisfaction could cost long-term retirement.

Studies have also found that parents with poor financial skills are more than two times likely to pull money out of savings plans designed to pay for college. This can compound the issues for your children since they may need to borrow more and you have not been exposing them to good habits.

Some millennials are dependent to some extent financially on their parents or may even live with them. This is a subject that may need to be discussed, especially as you approach retirement. Maybe it would be a good family endeavor to take some financial literacy courses together. Financial literacy is not taught very often in the school systems, so it should be no surprise that society is not prepared.

Gary Boatman is a Monessen-based certified financial planner and author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, contact business editor Michael Bradwell at mbradwell@observer-reporter.com.