By Darius van der Walt
From a financial literacy perspective, studies have shown that women lag men and that their financial confidence, when it comes to investing, is somewhat lower. While there may be many possible reasons for this, further studies suggest that today’s parents are still less likely to educate their daughters about money than they are their sons.
This could be an unconscious bias passed down over generations, where men traditionally worked, and women stayed home to look after children. Yet in today’s economy, only a very small percentage of the population can afford to live off just one income.
In honour of International Day of the Girl Child, which is observed on 11 October to celebrate and recognise the rights of girls and their unique challenges, it’s a good time to focus on the importance of proper financial education for your daughter.
It is increasingly important for young girls to be brought up to believe that they can have a successful career, earn their own income, and build their own wealth. We believe that raising your daughter to be financially savvy is one of the greatest gifts you can give her. Here are three tips on how to go about this.
Set a good example
Kids model the behaviour of their parents, which includes how they handle their finances. This means that it’s important for you to educate yourself first, so that you are in the best position to transfer basic knowledge about money and finances to your daughter. But don’t wait too long to start talking about money – experts say that financial habits can begin to form from as early as seven years old.
By speaking openly and honestly, and acknowledging your own money mistakes, you can provide your daughter with greater context and help teach her key financial principles. It’s equally important for your daughter to see you involved in the family’s financial matters and making purchasing decisions, as she will be more likely to follow your lead later in life and find her own voice in financial decision-making.
Begin with the basics
Although effective money management can be a minefield, helping your daughter to first understand the value of money is a good place to start. From counting piles of coins and comparing food prices at the supermarket, to basic household budgeting as she gets older, keep learning as fun and relatable as possible, as all these activities help to build better financial awareness.
Encourage your daughter to set and achieve savings goals, as this will help her to develop the ability to delay gratification and cultivate a long-term mindset. One way to motivate her to save is to zone in on what is important to her. For example, if your daughter is a keen tennis player, the cost of sporting equipment, kit and accessories can add-up quickly; by asking her to contribute towards these expenses, she will soon learn the importance of being able to budget accordingly.
Learning the difference between saving and investing is another fundamental lesson. Keep it simple by explaining that saving is a passive action referring to income that is not spent, whereas investing is about putting that savings to work so that she can make even more money from it.
Finally, ensure you educate your daughter on the “magic” of compound interest, which, unlike simple interest, grows faster without her having to lift a finger.
Get her started on investing
Although financial markets might seem difficult to navigate, an easy and affordable way to access them is by opening a unit trust investment in your daughter’s name and giving her the practical opportunity of seeing her investments grow in value!
What you teach your daughter today about making good financial decisions and building her own wealth, will go a long way in shaping her future, which could even have an impact on yours. By helping her to build a sound financial foundation, you are fast-tracking your daughter to develop healthy financial habits that will enable her to grow into a financially confident, comfortable, and secure woman.
Darius van der Walt is the head of product development at M&G Investments.
*The views expressed here are not necessarily those of IOL or of title sites.
IOL Business