Is it possible to teach what you aren’t aware of? According to one poll, it is.
National banking chain Discover’s survey found 82 percent of parents believe they are very knowledgeable about costs and potential debt related to their child’s college education. Yet 74 percent are very worried about being able to afford their child’s education and nearly half haven’t even applied for free financial aid.
“We would like to see more families take advantage of the Free Application for Federal Student Aid [FAFSA], which determines eligibility for financial aid,” Discovery’s senior VP Mike Boush says. “Our survey showed that only 45 percent of parents filled out the FAFSA, which means families could be missing out on grants and scholarships that do not need to be paid back.”
So how can parents be so confident, yet miss out on easily accessible help? Look at who taught them what they know about finance.
Playing the blame game
An overwhelming 92 percent of all parents think it’s crucial to include their kids in financial discussions on their loans. But parents run into problems when they try to “fake it until they make it” with money knowledge.
According to U.S. Bank, 77 percent of parents talk about saving money in general and over half talk about building and maintaining credit. At the same time, 51 percent of parents think the money in your savings affects your credit score and 52 percent think debit cards and checks help your credit score — both of which are false. A lack of knowledge leads to parents teaching their bad habits to kids.
But it’s not all bad. Despite 1-in-3 Americans calling themselves average in their financial knowledge, 90 percent want some type of high school graduation requirement tied to financial literacy. If you can’t teach, get someone else to do it for you.
Why parents should care
As a parent, aside from raising your kids to be independent and successful, a big reason to properly educate your kids on money is the fact that you have a financial stake in their future. Nearly three quarters (74 percent) of parents in the Discover survey say they plan to help their children pay for college, but 59 percent are worried that doing so may affect their retirement plans.
With 86 percent of respondents saying that it will be a shared cost between parent and child, the responsibility to become more educated is shared, too. Both need to communicate and become better money managers.
“It’s important for children to learn strong financial habits especially if they’re going to share in the responsibility of paying for college,” Boush says. “Our survey showed that nearly a third of parents responded saying they could only afford up to 25 percent of their child’s education, so it’s clear that parents and students will need to discuss how to fill that gap.”
Getting the conversation started on the potential need for student loans and their impact is a good step for older children and is something many Americans fail at despite wanting to talk about it. The best case scenario is to teach kids throughout their childhood about finance while making it interesting and fun for them. It’s not fun or interesting to learn when you’re neck-deep in debt.