Parents Key to Financial Preparedness, Delinquencies
Americans who inherited good financial habits from their parents, represent 62% of the borrowers who have a financial plan, are confident in their financial future and also are less likely to default on a mortgage loan.
“Psychology of Financial Planning Survey,” the first in a series of studies by Genworth, indicates younger Americans are taking steps early on to plan for their financial futures.
Whether that will translate into less delinquencies and better financial health amongst this age group remains to be seen.
As of now, 61% of respondents from two different age groups, ages 25 to 39 and respondents age 40 to 50, said they have a financial plan, compared to 63% of respondents over the age of 60.
The finding is particularly insightful given the economic turmoil of the past several years, said Genworth director of customer insights Pam Nelson. Despite the need to focus on their immediate financial situations, which usually “causes a mental block that prevents them from preparing for their financial futures,” young people are mapping their financial future.
According to the survey, most “financial feelings, attitudes and behaviors” are handed down from the parents through indirect teaching and observation. The data showing that more than six in ten or 61% of respondents believe that their parents set a good example for them in financial planning confirm that psychological assessment.
According to Barbara Nusbaum, a New York-based psychologist and money coach who commented on the survey findings, the current generation’s foundational years are occurring in a period of economic hardship and decline which is shifting this paradigm.
When explaining why people do and don’t plan for their financial future, Nusbaum said, responses speak for themselves.
From those who have a financial plan 66% said they had parents who set good financial examples, compared to 55% who did not.
Similarly up to 71% of those who feel confident in their financial future also had good family role models, compared to 53% who did not.
Of those who fear they will not have enough money to live comfortably in retirement only 33% said they had good examples form their parents compared to 41% of those whose parents did not set a good example for them.
These findings matter because for negative family history to not repeat itself generation to generation, researchers said, financial education can help separate the good and poor financial habits people inherit from their parents.
The “Psychology of Financial Planning Survey” was conducted online by Toluna and J&K Solutions on behalf of Genworth from Dec. 7-11, 2012 and is based on responses from 1,023 adults with a household income in excess of $50,000.