Talking about financial investments and products at home can help lead to greater financial literacy and a greater propensity to save for retirement, says a recent study.
The LIMRA Secure Retirement Institute in “The Roots of Financial Literacy: The Impact of Family on Financial Knowledge and Retirement Saving” reports that it found that the family is a powerful source of financial information and wields great influence over gaining the skills to make investments and save for retirement. The study found that financial literacy spells greater likelihood of saving for retirement, suggesting that the family plays a crucial role in laying the groundwork with children that leads to better preparation for financing retirement.
In the study, more than 50% of consumers say that their family is their most important source of financial information and more than three-fourths of families discussed saving, making it the most common financial topic they talked about. But there also is work to be done: less than one-third said that life insurance or the basics of investing were among the matters their families discussed, and 58% told LIMRA that they wished that their families had taught them more about investments and other financial matters.
The study shows that talking about saving for retirement and matters related to it can make a real difference in being financially prepared to retire. Almost 50% said that their families had discussed it.
And talking about other financial matters also had a positive effect on retirement saving, LIMRA found. No matter what the age and household income, knowledge about financial products and investments spelled greater likelihood of saving for retirement. The effect is very pronounced:
Relation of Saving for Retirement to Being Knowledgeable About Finances
|Demographic Group||Not Knowledgeable||Knowledgeable||Difference, Not Knowledgeable vs. Knowledgeable|
|Baby Boomers||81%||95%||14 percentage points|
|Generation X||68%||92%||+24 percentage points
|Millennials||55%||84%||+29 percentage points|
Parents on Board
The study has more hopeful findings: parents indicate that they grasp the importance of talking about finances with their children. And they are open to assistance and outside sources in that endeavor; 70% said they are at least somewhat interested in resources from financial services companies for that purpose. Websites and online videos are the platforms they most prefer in the effort, but there is a divide based on children’s age: More than one-third of parents of children younger than age 10 also expressed interest in online and mobile games that would help in the effort, and parents of children ages 10-17 were especially interested in local schools’ assistance.