When Deana Healy was 13, her parents sat down with a financial advisor to figure out how to prepare for retirement and pay for college for her and her 11-year-old brother. “And I truly believe I’m here because they had that conversation with the advisor,” says Healy, who heads the financial planning and advice team at Ameriprise Financial and holds degrees from Princeton University and Wellesley College.
“As a kid, you don’t know what your parents are going through. We were comfortable, but we were not wealthy. And they wanted the best for my brother and me, and they had to figure out how to carve up a limited set of resources to make that happen,” says Healy who spoke with Rethinking65 in connection with the release of “Parents & Finances,” a new study by Ameriprise.
The survey, which queried more than 3,000 parents 25 and older, found that families of widely different financial circumstances — from just starting out with modest means, to high net worth — share common goals, concerns and challenges.
“What struck me in the study was how parents were facing competing priorities that pulled on their wallets and their heartstrings,” says Healy, who as a financial advisor and stepparent now understands the pressures her own parents faced.
“And I’m so thankful that they did, in fact, reach out to an advisor,” she says. “I can absolutely sense now that tension that they felt between making sure they were going to be okay and setting my brother and I up for success.”
According to the study, 74% of parents say it’s important to seek professional advice when planning for their children’s future, and 88% of those report their advisor was helpful in making financial decisions related to their children. Advisors can help in many ways, according to Healy, from big-picture planning for college and retirement, to helping parents make their kids financially savvy.
“The best thing to do for clients is help them have conversations to determine what’s important to them as it relates to instilling values into their kids about money,” she says.
As a holder of the Certified Financial Planner designation, Healy says advisors to parents need training in behavioral financial advice, which is included in the CFP curriculum as well as some specialty designations.
Healy says the Ameriprise research demonstrates the importance of fostering multigenerational relationships. Advisors have an opportunity to work “up and down the family tree” by meeting with clients’ children and providing advice that helps each generation reach their financial goals, she says, adding that it will strengthen client loyalty when wealth transfers happen.
The survey also reveals areas of opportunity for advisors. Parents said they want to talk to an advisor about leaving an inheritance (34%), educating children about investing (33%) and how to pass down their financial values to children (30%) — and that they haven’t yet discussed these topics. Healy suggested that advisors proactively discuss them to provide additional value and go deeper with clients who are parents.
Overspending on a Parental Guilt Trip
Not surprisingly, the noblest parental motivation is also the biggest source of anxiety: parents’ desire to give their children the best today and over the long term. This goal was cited as a stressor by 44% of respondents. And that leads to another big challenge — the feeling parental guilt, experienced by 72%. More than a third of respondents (35%) say they put pressure on themselves to be the “perfect parent,” a trait that does not change over time, Healy says. “That was as common with parents with younger kids as older kids,” she says.
The result of those pressures can be overspending on the kids. Parents who feel guilty reported:
Offering children treats or perks (52%).
Overspending on an item or experience (43%).
Doing something beyond their original budget (33%).
Billed as a “fun fact” in the report: Parents with kids 15 and older say their top regret is spending too much on toys and technology (24%).
“That notion in the moment, that this is the most important thing to have, whatever the new technology is, but feeling that sense of regret afterwards … That does come out if parents and families haven’t had a conversation about what’s important to them,” says Healy. “You have to start with what you want, for you, your kids, your grandkids, for the long term. That helps us make sure that those mistakes, if you will, are minimized.”
Balancing Act
Not surprisingly, parents say they are balancing near-term and long-range financial priorities, including:
Saving for retirement (59%).
Paying for their children’s education (39%).
Managing day-to-day living expenses (36%).
More than half of parents (60%) say they fear the tradeoffs they’re making will affect their long-term financial goals. “I absolutely think advisors can help. And I think starting with talking about what your financial goals are, what your values are,” Healy says. “I want to retire at this date. I want to make sure my kids are ready for college.”
One survey respondent summed up nicely, she says: “Take it easy, none of us know what we are doing.”
“That’s true,” Healy says, “Do the best you can, and advisors can help you recognize that.”
Most parents (89%) plan to pay for at least a portion of their children’s college education, with 49% reporting that they started saving before their child was 5 years old, and 9% starting before the child was born.
Along with those serious considerations, 91% of parents have a family “bucket list,” and 80% say taking vacations together is the top item.
Teaching the Kids the Value of Money
“It is never too early to teach children about money,” one survey respondent says. Most parents (72%) seek to make their children financially savvy through various means, including:
Opening a savings account for them (76%).
Encouraging them to save for a short-term goal (68%).
Stopping them from spending unwisely (61%).
Additionally, many pay their kids for positive actions and achievements:
Chores (68%).
Good grades (55%).
Babysitting (28%).
Kind or helpful behavior (26%).
Athletic achievements (24%).
And 55% give their children an allowance. Also chipping in is the tooth fairy. The going rate for one tooth these days is $5, on average. “Can you talk about what $5 means to your 7-year-old who’s losing a tooth?” Healy asks. “Those are great opportunities to do that.”
Simply sitting down and talking with your child is an important part of their financial education, Healy says. Shortly before speaking with Rethinking65, she had a chat with her stepdaughter.
“We were talking about college funding and … what college would look like, and helping her put together a spreadsheet to detail out the costs,” she says. “That conversation is appropriate at 17, in my opinion, because they’re embarking on four years-plus in college at a decent expense.”
But, she adds, it’s never too early to start teaching your kids about money. “Finding age-appropriate ways — starting when they’re very young — to talk about money is a terrific way to build key habits and values in children and set them up for financial success in the long-term,” she says.
Advisors have an important role to play here, Healy says, by suggesting age-appropriate topics, providing education on topics like paying for college, and being a resource to facilitate intergenerational conversations. These conversations can include setting expectations with children on an inheritance, or on potential support for key milestones such as a first home purchase or wedding, she says.
Bad Influencers
While most parents strive to make their children financially savvy, 60% of the survey respondents with kids 15 and older are concerned their children may follow bad financial advice they find on social media. Parents fear their kids may be attracted to fads or get-rich-quick schemes, instead of focusing on “the everyday hard work of living within your means and setting aside money towards your future goals,” Healy says.
“That isn’t an easily Instagramable video that will garner millions and millions of lives,” she cautions.
No HNW Difference
Asked if the survey found different attitudes and practices for high-net-worth families, Healy says parents are much the same no matter what their wealth and income. “We surveyed a wide variety of backgrounds, whether that be income or gender or … married or divorced or widowed,” she says. “We didn’t necessarily see dramatic differences between income levels as it relates to their responses. Parents still wanted to do the best for their kids.”
Ed Prince is a writer for Rethinking65. In a four-decade career in journalism, he has served as an editor with many of New Jersey’s leading newspapers, including the Star-Ledger, Asbury Park Press and Home News.
