Practical Tips on Raising Financially Astute Daughters
by Rachna Bijlani, CFP®
March 1, 2019
Until recently, I was totally opposed to the idea of earmarking a single day in the calendar every year as ‘International Women’s Day’. I believed that every single day belongs to all of us irrespective of our gender, race or sexual orientation and what really matters is what we make of that day. My illusion of a gender-neutral society was attributed to the fact that I was raised in a matriarchal household, where my grandmother was the head of the family. Over the years, I've realized that women all over the world are still striving for gender equality and on this day, we acknowledge their struggle, honor them and resolve to do our part to fill the gender gap. By sharing my personal experience and my expertise as a CERTIFIED FINANCIAL PLANNER™, my goal is to help you raise financially savvy girls. I hope that my attempt will someday help level the playing field between men and women, when it comes to money.
Start Early – I must’ve been around five years old when my dad threw a wad of cash my way and asked me to help him count. That was my first real Math lesson. A few years later, he was teaching me how to compute interest and make investments. My grandmother taught me how to budget and make an income statement while I was still in elementary school and when I was in my teens, my dinner table conversation with my grandfather usually revolved around stocks and bonds. Starting early on, create an environment to build your daughter’s confidence in handling money. Talk to her about what you do for a living, your income and expenses, liabilities and net worth. Discuss your financial goals and priorities, your investment process and your values and attitude towards money with her. Do not make the mistake of presuming that these concepts are out of your daughters’ grasp or interest.
Life Skills- Teach her life skills like budgeting, tracking income and expenses, cooking, grocery shopping, cleaning and organization, changing a tire, paying bills, fixing things around the house and more. Being able to do all this for herself will make her self-reliant and in the process, help her save more money and plan her finances better in the future.
Realistic Career Goals – Emphasize on ‘Follow your Strengths’ instead of ‘Follow your Dreams’. It is our responsibility as parents to give our children’s dreams some structure. Like every other pop culture obsessed adolescent these days, my 11 year old daughter’s dream is to be rich and famous. We discussed all the things that bring her joy and possible career options. After weighing all her options, she realized that although music makes her happy, she is exceptionally gifted at Math and just like her mother, working with numbers brings her joy. She figured that her odds of becoming rich and famous as a money manager are better than making it big as a musician. She wants to pursue music while analyzing and managing investment portfolios. Encourage your daughter to dream big but also teach her how to connect her dreams with reality.
Delayed Gratification – Teach her that resources like time and money are limited. Every time we make a choice, we are also making a tradeoff. Would she rather spend time studying to improve her grades and consequently her future prospects or watch some frivolous video on Youtube? Would she rather spend $5 on lip gloss today or invest it and wait till it grows to $10 in the future to buy something better for herself? Teach her how to analyze opportunity cost and also the benefits of delayed gratification. Teach her the value of money but more importantly, teach her the Time Value Of Money. Talk to her about concepts like the potential earning capacity of money, interest rates, expected investment returns and inflation. Give her practical examples to demonstrate how inflation erodes purchasing power and how $100 invested today has the potential to grow into a lot more in the future. You taught her how to save money in her piggy bank when she was a toddler, now take the next step and talk to her about investing. Offer to invest on her behalf and involve her in the process of selecting and tracking her investments.
Tools – Equip her with the right tools to increase her probability of success. From buying her gender-neutral toys when she’s young, to investing in a 529 plan for her future education, to protecting her with an estate plan, there’s a lot that you can do to make sure that she gets a solid foundation. Most importantly, give her self-esteem and a strong voice so someday, if the need arises, she does not hesitate while demanding equal pay as her male counterparts; she does not feel compelled to stay in an unhealthy relationship just for the sake of financial security; so someday, she can manage her financial affairs like a pro!