When families are blessed with little girls, the images that come to mind are often of frilly dresses, shopping trips and weddings. While those things can and do create wonderful memories, they all come with a price tag attached. Every trip to the mall and walk down the aisle costs money. With that in mind, teaching your daughter about money may be a gift you can give that can last for a lifetime.
1. Talk to Her About Money
Chances are that nobody talked to your grandmother or your mother about money and perhaps not even you. Break the cycle. We live in the modern era, where women run businesses, serve as CEOs, CFOs, mathematicians, accountants, money managers and financial advisors. Despite the stereotypes about men having better math skills and investment acumen, women have demonstrated success in every professional and financial endeavor they have undertaken. By simply talking to your daughter about money, you will expose her to the topic, increase her knowledge and, ideally, engage her interest in a subject that will be an important part of her life.
2. Teach Her the Basics
There are a host of financial activities that are simply a part of everyday life. The basic tasks associated with banking, including writing checks, borrowing money and paying interest, occur on a monthly basis in most households. Explaining these activities to your daughter will go a lot further in helping her develop real-world skills than handing her a lollipop after you pull away from the drive-through teller's window at your bank. The same goes for the basics of budgeting. For many children, the first time basic monetary and financial concepts are introduced in high school, as they were never taught at home. Give your daughter a head start by teaching her about the basic financial activities that take place around her on a daily basis.
3. Encourage an Interest in the Topic
At first glance, money and finance may not seem like topics that will be of interest to a little girl, but engaging a child's attention may be easier than you think. Start by giving your child money and letting her make decisions about how to spend it. An allowance of just a few dollars a month is a simple, inexpensive way to get her started. After your daughter has made a few purchasing decisions on her own, she will have a better understanding of the value of a dollar, the limitations of purchasing power and the need to save money, if the item she wants costs more than her allowance.
4. Foster a Culture of Saving
Introducing the concept of interest is also important, once she learns she needs to save. Again, the process is easier than you might expect. The next time you give your daughter her allowance, offer to give her an extra 25 cents for every dollar of her allowance that she has not spent by the time she receives her next allowance payment. This will reinforce the lessons of the spend-or-save decision, while also providing insight into how to make wealth grow.
Of course, it's easier to save money if it's put away somewhere. Open a savings account at your bank for her; many banks have interest-bearing savings accounts especially for children. Having her own bank account is an important step in teaching her to manage her money.
5. Teach Her to Invest
When you are ready to move beyond the basic tenets of spending, saving, and interest, it's time to talk about the stock market. Purchasing $100 worth of stock in the company that makes your daughter's favorite toy or broadcasts her favorite television program is an excellent choice for a birthday gift. Following the price of the stock and the value of the investment will provide a real-life lesson in how the stock market works and the potential merits and perils of investing. It will also provide insight into how stocks are bought and sold and how to read a brokerage statement.
From there, it's an easy segue to learning how to pay attention to the news and the factors that are influencing the price of the selected company's shares. This can lead to an interest in economics, stock analysis and more. Remember, girls can read the Wall Street Journal too.
6. Discuss Career Choices and Education
As your daughter gets older, the lessons can become more detailed and sophisticated. You can talk to her about the differences between an employee and a business owner, a worker and a manager, a blue- collar job versus a white-collar job and the economic opportunities presented by each career choice.
The same type of discussion can be had on the subject of education. You can talk about the earnings potential differences between high school and college graduates, as well as the cost of a college education and the cost-benefit analysis behind the decision on whether or not to spend the money on an advanced education.
7. Encourage Independence
Following the conversation about the costs of education, lessons about the financial aspects of being in a serious relationship are also in order. Issues such as whether she'll share a joint account with her partner or keep finances separate, whether to file taxes together or separately, and even how to budget as a couple, are important topics.
Your daughter's generation has significantly better access to resources, career options and information than prior generations did. Teach her to identify, think about and use those tools so that she will develop the critical thinking and analytical habits that will help her make both financial and non-financial decisions, in the years and decades ahead.
8. Talk about Marriage and Money
Following the discussion about maintaining independence in a serious relationship, it's an easy and natural segue to talk about marriage and money. Choosing the right partner and developing a relationship based on shared values, both personal and financial, can play a pivotal role in meeting financial objectives and achieving a secure financial future. The reverse is also true. Handling finances together as a married couple means having discussions about wills, life insurance, education savings for children and plans to grow old together into retirement. Share with you daughter what you have done with finances in your own marriage, that you found successful.
9. Explain the Financial Realities of Raising Children
Children don't often stop to think about it, but the truth is that raising children is an expensive proposition. Food, shelter, clothing, recreation and just about everything else associated with kids cost money. Since women bear the biological responsibility of childbirth and often the primary responsibility for raising children, there is a greater statistical likelihood that they will bear financial responsibility for their offspring. Women who choose to step out of the workforce after having a child also face the reality of reduced lifetime earnings and career opportunities.
These financial realities are not necessarily disincentives for childbearing but rather serve as a reminder that actions have consequences and that those consequences should be taken into consideration when making decisions. In this particular instance it applies to childbearing, but in reality the lesson goes far beyond that, as it will apply to decisions both big and small that your child will make throughout the course of a lifetime.
10. Teach by Example
Children learn by example. They watch the world around them, take in the information from their environment and are shaped by that information. Providing lessons to guide them toward the right path is an important part of the effort to teach them about money and finance, but is only one part. The heart of matter is to live your values. By actively practicing all of the values that you want your children to absorb and exhibit, you will provide lessons that last longer than any lecture.