Were Your Parents Good With Money?

Here’s an interesting article coming to us through Time Magazine – fully half of adult children (over age 30) say their parents made (wait for it)… no financial mistakes.  That’s right – the Fidelity Intra-Family Generational Finance Study revealed that 47% of children believe their parents (55+) took all the right steps on their way to their current situation.

Intentional Ignorance?

Burying their heads in the sand?  Excessive optimism?  Symptomatic of a bigger issue with society?  I couldn’t tell you – and my parents (regular readers of DQYDJ) certainly weren’t perfect in that aspect of their lives – but, I can certainly tell you they could be worse.  To believe that 47% of families somehow did things better than they did requires a suspension of disbelief so absurd I could probably believe every Hollywood release is based on a true story.

Man in front of slot machine.

Dad’s Rebalancing His 401(k) This Weekend!

That’s right, I’m saying that adult children really are burying their heads in the sand.  Let’s turn to EBRI’s 2012 Retirement Confidence Survey – an annual report I watch pretty closely.  Turn to the breakdown by ages, especially in the 55+ cohort – to cherry pick a few lines: only 16% of those 55+ believe they have enough saved to live comfortably in retirement, and, more damning, only 18% believe they are doing a good job in saving for retirement.

How do you rectify those two numbers?  47% of adult children are saying their parents have done no wrong, yet only 18% of the parental age range are even claiming they’ve done enough.  Now, the wording isn’t even exactly what we’re looking for – saying “you’ve done enough” isn’t the same as saying “you’ve made no missteps”.

How Are Your Parents Doing?

Here’s a blast from DQYDJ’s past – 45-49 years old is the peak of the average worker’s earning potential, and the top of his or her financial prowess.  That (probably, but why risk it?) means, in essence, your parents aren’t as financially savvy at they were even a few years earlier.

How can you solve it?  You need to talk to your parents about things like their wills, long term care plans, life insurance (especially if they still have a mortgage), and (perhaps most importantly) their investment and savings mix.  If you aren’t confident in your abilities?  Find them a trusted adviser.

What’s the alternative?  Do nothing and pretend that your parents can do no wrong when it comes to finances.  That doesn’t seem like a good option.

So, are your still-working parents making only good decisions money-wise?  Did your retired parents make perfect money moves?

Comments

  1. says

    My parents were good with saving money, but as far as I know not so good with investing. My dad is the kind of person who doesn’t talk about money ever, to anyone. So I can only judge based on his lifestyle. He spends virtually no money so I’m assuming that he has a pile saved somewhere.

    My mom is terrified of personal finance so she has a financial planner do all the thinking for her. She doesn’t seem worried, so I’m guessing that she’s doing okay.

  2. says

    My parents were good with saving money, but as far as I know not so good with investing. My dad is the kind of person who doesn’t talk about money ever, to anyone. So I can only judge based on his lifestyle. He spends virtually no money so I’m assuming that he has a pile saved somewhere.

    My mom is terrified of personal finance so she has a financial planner do all the thinking for her. She doesn’t seem worried, so I’m guessing that she’s doing okay.

    • says

      My parents are more open with their money – and they know about the site, which gives me cachet in their eyes. Silly them!

  3. says

    My parents were/are pretty terrible at money. Though I didn’t realize the full extent to how bad it was until a year or two into college. My mom is going to have to work into her 70′s for a shot at a tiny state teacher’s pension and my dad’s been unemployed for the better part of the last decade. Like I said, it’s pretty clear they’ve made some bad choices.
    Mr. PoP’s parents didn’t make perfect choices (who does, really?), but they’ll be fine in retirement. His dad is already there and his mom will follow soon within a couple of years – both with a big fat state pension, healthy retirement accounts, taxable investments, and some income producing real estate. We’re not really worried that their penchant for thrift stores will bring them to the brink of bankruptcy.

    • says

      I wish your parents (both sets) luck – the economy did take a fortuitous turn for the better to get out of the Great Recession, which no doubt makes things better than they were in, say, 2008.

  4. says

    My parents grew up post WWII restrictions so they were good with squirreling away the money my father made and managing the household on one income so we still got holidays and private schools. They were good teachers about the value of money and that we had to earn anything to buy stuff on top of the basics they provided. But they are terrible estate planners and I am pretty sure half of the money they worked so hard to make will end up in taxes, inheritance and otherwise and they won’t change that.

    • says

      On the estate side – I’ve told my parents I want nothing (and they read this site, so you know I’m being truthful here, haha). I mean, I don’t want it going to the state, but I’d prefer it went to their enjoyment than to their working stiff children (heh).

  5. freeby50 says

    Interesting survey results. Couple theories on why the numbers may
    be high. 1st, children aren’t always aware of whats going on with
    their parents finances in much if any detail. So if my parents made a
    big financial blunder when I was growing up then I may not have known.
    Often families don’t really discuss financial details with the kids
    because they want to keep that burden off their children. Also the
    parents may not take blame for the mistakes but could place the blame
    elsewhere. Say for example my Dad totally made an aweful purchase of a
    rental property in the 1980′s. He might not say “I paid too much” but
    he might instead blame the “crooked realtor.” (theoretically). A
    child would then not see the parents mistake but instead believe the
    blame lay elsewhere. Another theory : the people polled are in
    their 30′s so their parents are in their 50′s and 60′s. By that age
    the parents have likely worked past their financial mistakes to the
    point that they’re doing “ok”. The children polled may look at their
    parents current seemingly “ok” status and that may skew the impression
    of what mistakes their parents made. That rental my dad theoretically
    bought has been paid off and now has positive cash flow from the
    rents. So it can look like he didn’t make a mistake because he’s now
    profiting.

    • says

      Oh absolutely, and even if their parents are dropping hints I bet a number of these couples are just missing what their parents are sharing. Then, at a certain point? Caught by surprise.

      On your final theory – these kids are saying “no” mistakes, they aren’t as thoughtful as the commenters here and saying “few” or “not many”. Taking “all the right steps” is a huge bar to clear, IMO.

  6. freeby50 says

    This reminds me of another poll I read that claimed that abut 50% of people couldn’t figure out if a bank account paying 2% interest would gain or lose money over a year. I suspect theres a lot of overlap between the people who think they never make financial mistakes and the ones who can’t do simple finance math.

    American self esteem is delusionally high. :(

    • says

      “Welcome to Lake Wobegon, where all the women are strong, all the men are good-looking, and all the children are above average.”

  7. says

    I actually do think my parents did make fairly good choices with money compared to the average couple. That being said, I’ve noticed a few things that now that I think about it, I might have done differently. It’s important to try to balance respect we have for parents, with a realistic view of their decisions – so we can learn from them.

    • says

      I do, absolutely – I just have an issue with the survey choice, heh. I wouldn’t say my parents took “all” the right steps. There were definitely some wrong steps, backtracking, etc… and they turned out fine, but I would have been in the minority on that survey.

  8. 101 Centavos says

    This disconnect is not unexpected. There’s a shroud of silence around money topics in families. Parents don’t tell their kids how much they make — just in case they blab to the neighbor’s kids — and kids don’t talk with their parents. As for my own parents… yes, they could have done better, they made their share of mistakes. And so did we.

    • says

      I’ve made a lot of mistakes myself – and luckily for my kids, they will be fully documented on this marginally interesting website.

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