Wealth makes no difference to teaching financial skills, research finds

Mar 11, 2013

Research has found wealthy people often fail to formally pass on financial literacy skills to the next generation. This is despite the fact that many have concerns about the ability of their intended heirs to manage their inheritance well.

Massey University senior lecturer Dr Claire Matthews says she found the results of the interviews with high net worth individuals "quite surprising".

"We know from previous research, including the Fin-Ed Centre's , that people pick up their skills from observing their parents, rather than formal instruction," she says.

"But with this particularly group there was an expectation they would want to actively pass their onto their kids. Unfortunately that's not necessarily the case."

In the research face-to-face interviews were conducted with people whose net worth was valued at $1 million or higher, with the aim of understanding how they taught their children to manage money.

"The coming years will see a massive shift in wealth as baby-boomers start to transfer their assets to their children, so it's important that there is also an effective transfer of financial literacy," Dr Matthews says.

"Without that happening, the next generation will repeat the same expensive, yet avoidable, mistakes that come with the traditional trial-and-error approach to gaining financial wisdom. For this group that brings a risk of losing significant wealth, of destroying value rather than creating it."

One-third of those interviewed had concerns about their heirs' ability to handle their inheritance, yet 70 per cent of those with concerns stated that they had not provided their heirs with any assistance.

"It's interesting that 94 per cent said it was either 'important' or 'very important' to provide their children with strategies for , but very few actually discussed with their family. This highlights a huge gap between thought and action, which is cause for concern.

"There seemed to be an almost Victorian attitude towards talking about money – as one participant put it, 'I'm sure financial matters are more sensitive than sex.'"

Dr Matthews says it is important for all parents to discuss financial literacy with their children.

"The Fin-Ed Centre's longitudinal study found that 72 per cent of young people looked to their parents as positive financial role models, so I think parents need to take that on board. As well as the discussion about the 'birds and the bees' they need to have the 'big money talk'," she says.

"And if don't have a high level of financial literacy themselves, they need to go out and get those skills so they can pass that really important knowledge onto their kids."

Explore further: Poll: Big Bang a big question for most Americans

More information: Dr Matthews' co-authored paper 'Intergenerational transfer of financial literacy' can be downloaded from: bit.ly/Y7FFEv

The first longitudinal study results 'How young New Zealanders learn about personal finance' can be downloaded from: bit.ly/YTCdhq 

add to favorites email to friend print save as pdf

Related Stories

Financial literary bailout for the younger generation

Jun 02, 2010

In the aftermath of the global financial crisis, financial literacy is still low among young adults. According to a new study published in the Journal of Consumer Affairs, only twenty-seven percent of people aged 23-28 can an ...

College students and credit card debt—parents at fault?

Oct 18, 2012

Parents need to be good role models to help their children make sensible financial decisions, according to Adam Hancock and his team, from East Carolina University in the US. Their work highlights that parents who argue about ...

Mom and dad as financial advisors

Jul 27, 2009

Why are so many students deep in debt before they finish college, only to take on more debt as they begin their careers? The answer may be found by looking at the social forces that shape the attitudes and behaviors of today's ...

Recommended for you

Poll: Big Bang a big question for most Americans

2 hours ago

Few Americans question that smoking causes cancer. But they have more skepticism than confidence in global warming, the age of the Earth and evolution and have the most trouble believing a Big Bang created the universe 13.8 ...

Study finds law dramatically curbing need for speed

Apr 18, 2014

Almost seven years have passed since Ontario's street-racing legislation hit the books and, according to one Western researcher, it has succeeded in putting the brakes on the number of convictions and, more importantly, injuries ...

Newlyweds, be careful what you wish for

Apr 17, 2014

A statistical analysis of the gift "fulfillments" at several hundred online wedding gift registries suggests that wedding guests are caught between a rock and a hard place when it comes to buying an appropriate gift for the ...

Can new understanding avert tragedy?

Apr 17, 2014

As a boy growing up in Syracuse, NY, Sol Hsiang ran an experiment for a school project testing whether plants grow better sprinkled with water vs orange juice. Today, 20 years later, he applies complex statistical ...

Creative activities outside work can improve job performance

Apr 16, 2014

Employees who pursue creative activities outside of work may find that these activities boost their performance on the job, according to a new study by San Francisco State University organizational psychologist Kevin Eschleman ...

User comments : 0

More news stories

Poll: Big Bang a big question for most Americans

Few Americans question that smoking causes cancer. But they have more skepticism than confidence in global warming, the age of the Earth and evolution and have the most trouble believing a Big Bang created the universe 13.8 ...

Egypt archaeologists find ancient writer's tomb

Egypt's minister of antiquities says a team of Spanish archaeologists has discovered two tombs in the southern part of the country, one of them belonging to a writer and containing a trove of artifacts including reed pens ...

Finnish inventor rethinks design of the axe

(Phys.org) —Finnish inventor Heikki Kärnä is the man behind the Vipukirves Leveraxe, which is a precision tool for splitting firewood. He designed the tool to make the job easier and more efficient, with ...

Making graphene in your kitchen

Graphene has been touted as a wonder material—the world's thinnest substance, but super-strong. Now scientists say it is so easy to make you could produce some in your kitchen.