SUMMARY

Financial literacy is a critical life skill that everyone should learn to master, but it can be easy for girls to fall behind from an early age. Here we have provided tips on how you can start talking to your daughters and granddaughters about money.

We all want the young women in our lives to flourish, with the purpose, choice, and possibilities that come with financial peace of mind. Yet studies show that women earn less per hour worked and invest less of their money, while living longer than men, resulting in a lifetime wealth gap of over $1 million¹. How can we give our daughters a financial head start? Here are six ways you can model good financial skills.

 

1. Lead by Example

Studies² show that 9 in 10 women are expected to be the sole financial decision maker at some point in their lives. Just as you model “show, don’t tell” with other aspects of parenting (like being responsible and working hard), the same goes with finances.

What money values are your actions teaching? For example, with online shopping now the norm, lots of families receive boxes and shipments at home, and it’s easier to disconnect the act of spending when you’re making online purchases. The next time you order an item for your daughter, take the time to explain where the item comes from and how much it costs. Even sharing ideas around cost and spending can help girls start to think about how things have monetary value, and what kind of emotional value they want to assign to having “stuff.”

 

2. Be Honest

A 2017 study³ found that only 23% of kids talk with their parents frequently about money. Don’t let money be a taboo subject! Talk about your financial goals, successes, and yes, even failures. If you ran up credit card debt in the past, share that. Not sharing or hiding your financial habits robs children of an opportunity to learn from your successes and mistakes.

You don’t need to lead up to a big conversation about money. Try to find opportunities on a regular basis where you can explain how you spend money, either for yourself or as a family. Perhaps you could talk about the importance of paying bills on time, saving for a big trip, or that impulse purchase of a new device. Having frequent conversations about money can help normalize their attitudes about money, and help them feel financially confident when the time comes to manage their own finances.

 

3. Focus on Cashflow

Women are responsible for 86% of a household’s consumer purchasing decisions⁴. Saving, budgeting, and debt management are crucial life skills, but usually these skills are not taught in schools – nor in any other setting.

Here are some ideas you can share with your daughters:

• Examine the difference between a need versus a want. Try and use an example that’s relevant for your family. It could be as simple as explaining how you need a house or a place to live (and what that entails, from paying rent or mortgage to needing home insurance, depending on how old your daughter is), vs. how you want to take a trip to Europe over the summer – and you could even throw in conversations around currency!
• Discuss the cost of borrowing, and the difference between good debt and bad debt. For younger daughters, teach the concept of borrowing and what that means. For older daughters who are perhaps ready to start handling finances on their own, you can talk about what debt is, why it’s important to manage debt prudently, and the differences of good debt and bad debt. An example of bad debt would involve talking about credit cards and the usually high interest rates that come with them. Mortgages or student loans could be possible examples of good debt.

 

4. Make Investing a Priority

According to a study by PNC Investments, 63% of millennial women vs. 53% of their male peers learned from their parents about saving money at an early age, but only 29% of those same women said their parents showed them how to grow wealth vs. 37% of men. Due to this lack of education, women tend to feel less confident about investing, and also end up investing less (only 37% of women invest outside of an employee-sponsored retirement account vs. 48% of men)⁵. This is bad news, because women live longer than men and also typically earn less than men.

Talk to your daughters about setting financial goals and about how investing can help them meet those goals. Explain to them the importance of compounding interest, which is interest you earn from the initial sum you invest, plus all the accumulated interest of previous contributions. You can demonstrate the idea of compounding interest by giving your daughter a small amount of money, and offering to add to that amount each day – for as many days as she is able to save.

You could also ask her about some of her favorite brands or the companies she likes. If any of these companies are public, this could lead to a discussion about the stock market and how stock ownership works. You can also start a 529 plan for her college education, or use earnings from her summer job to fund a Roth IRA.

 

5. Encourage Generosity

As women’s incomes rise, they are more likely to give to charity than men⁶. Introduce volunteering and charitable giving at an early age. Talk about donating or giving away items they no longer use. It’s likely that you’ll find opportunities to get involved where you live – whether it’s through volunteering at a homeless or women’s shelter nearby, or participating in fundraising events at a school or other kid-focused organization. Charitable involvement not only helps those in need – it’s also been shown to increase happiness in the giver, and helps inoculate against “lifestyle creep.”

Microlending is one possible way you can combine teaching financial skills while doing good. Microlending is a part of the peer-to-peer economy (where people lend money to other people without involvement of a third party, like a bank), and has gained popularity as advances in technology have made sharing information easier. Microloans are usually given to people who live in places where traditional financing is not available (such as developing countries). Interestingly, studies have shown that microfinance can be more effective when women are the participants. Why? It’s because women tend to make more positive improvements to their businesses after receiving a loan than men do, and also to reinvest more of their earnings into their families⁷.

Microlenders tend to be nonprofit organizations and mission-focused, and microloans can start with surprisingly small amounts (for example, Kiva loans start at $25 ). Here are some other microlenders you may want to check out.

 

6. Fight Stereotypes

Watch out for your own unconscious gender bias. Encourage your daughter’s natural curiosity, impulses, and desire to speak up. Avoid language that sends the message that girls are not as powerful or capable as boys. Teaching our daughters to own their strengths will help them advocate for themselves in future salary negotiations and increase confidence as they start investing.

Studies have shown that kids as young as 3 years old can benefit from learning about financial literacy⁸ and that by age 7, they have already formed financial behaviors⁹. A lack of knowledge about finances can hinder our daughters from pursuing their dreams or leave them trapped in unsatisfying careers, or even an unhealthy relationship. Let’s empower them with the education and confidence they need to live their best lives.

 

Resources for teaching kids about money

Federal Reserve Education
Jump Start Financial Education
US News – Fun Money Apps for Kids
Best Apps to Teach Kids About Money

 

Additional Resources

On our Insights page, you’ll find two special reports on My Spending Plan and Balance Sheet Basics that may help to provide foundational financial knowledge for your older daughters.

Have children ready for college? Listen to our podcast episode, “How to Fund College Without Going Broke,” to learn more.

---

¹ “Women & Financial Wellness: Beyond the Bottom Line,” Merrill Lynch.

² Long, Heather (2/19/15). “Female investors often beat men.” CNN.

³ “T. Rowe Price: Parents Are Likely To Pass Down Good And Bad Financial Habits To Their Kids,” T. Rowe Price, 3/23/17.

⁴ Witter, Lisa, Lisa Chen, and Inc. NetLibrary. The She Spot: “Why Women Are the Market for Changing the World–and How to Reach Them,” San Francisco: Berrett-Koehler Publishers, 2008.

⁵ “How We Really Feel About Money, in a Few Simple Graphs,” Wealthsimple.

⁶ Women’s Philanthropy Institute, Lilly Family School of Philanthropy. “Do Women Give More?” September 2015.

⁷ Women’s World Banking in collaboration with Accenture. “The Impact of Microfinance on Woman and Economic Development.”

⁸ Grinstein-Weiss, Michael and Sherraden, Margaret. (4/3/15) Journal: “Start Children Early for Financial Success.” Brookings.

⁹ “Economic Literacy for Life: Today’s Lessons = Tomorrow’s Financial Stability and Success,” Federal Reserve Bank of St. Louis.