There’s no better time to teach someone how to value and manage money than when she’s young.
Imagine being able to go back and give financial advice to your younger self, based on what you know today. What guidance would you give to yourself at age 20? Regions posed that question as part of its 2015 Women and Wealth Study, and the overwhelming response was to start saving more money earlier and seek professional advice along the way.
Of course, that’s smart advice for almost anyone. But women face unique challenges when it comes to managing their finances that their male counterparts often don’t, notes Missy Epperson, SVP & Area Wealth Executive for Regions Private Wealth Management. “There are still many households in which women are not involved in the family financial decision-making process, so young women might not have the opportunity to be engaged in the process or to see a live example,” she says.
As a result girls tend to have less exposure to finances than boys at a young age. This lack of exposure could have consequences for their financial interest level, confidence and readiness down the road, says Leslie Carter-Prall, Executive Vice President of Regions Private Wealth Management. For example, Carter-Prall points to research that shows a majority of women will be responsible for managing the household budget and assets at some point in their lives. Unfortunately, research also suggests that many young women may not be getting the financial education and other confidence-building tools they need to do that successfully.
“We need to change this trend and prepare young women for the financial realities of the adult world, ” she urges. And there’s no better time to teach someone how to value and manage money than when she’s young. So whether you’re a parent, a grandparent or other relative, you can be a resource — and an inspiration — for the young women in your life.
Start Early
By the time your daughter is in preschool, she’s ready to start learning the value of money, Epperson says, and teaching opportunities are easy to find once you start looking for them. For example, if she receives a $25 check for her birthday, take her to the bank, get it cashed into smaller denominations and help her divide that cash into three buckets — one for giving, one for saving and one for spending. “Then keep that system in place,” Epperson says. “Every time she receives money — for a chore, an allowance or a gift — use the same allocation.”
Even preschoolers are able to talk about their feelings, so ask them about their money. How does it feel to be able to help other people? How does it feel to see your savings grow toward something you want to buy? And did you really enjoy spending the $5 you received on a toy that ended up breaking the next day? “You can help them develop a respect for money,” Epperson adds.
Go Beyond the Basics
Those early lessons on saving and spending set the stage for teaching your daughter about budgeting — the foundation of a solid financial management education. By the time she’s a preteen, start talking to her about how you manage your budget. You don’t need to share the entire family ledger with her, but you can have her sit down with you every month when you’re paying the bills. Talk to her about how you balance your income with your spending needs so she can begin to understand the true costs of things she may take for granted, such as the actual cost of her cellphone plan or your family’s monthly grocery budget.
Then involve her in some of the spending decisions you make as a family, such as planning a vacation. Talk to her about how much money is in the travel budget and discuss the options for spending that money. For example, should your family take one big vacation or two smaller ones this year? Understanding that trade-offs have to be made based on the money available will be a useful tool for her as she starts managing her own budget.
Explain ‘Wants’ Versus ‘Needs’
Learning to accept those trade-offs as part of life can also help your preteen or teen counter the constant pressure from friends and the media to acquire the latest and greatest … whatever. “There is always going to be something new and better out there, whether it’s technology or clothing or handbags or shoes,” Epperson says. “So use this as an opportunity to talk about ‘wants’ versus ‘needs.’”
Say you recently bought your daughter a pair of running shoes, but a new style just came out that all her friends have. If she wants the new shoes, don’t just say “no.” Help her come up with a plan to buy them herself. She can earn extra money babysitting or taking care of the neighbors’ yard when they are away.
You can even teach her the rewards of saving by paying her “interest.” Offer to add $1 to every $5 she earns on her own. “Then when she meets her goal and buys her new shoes, really celebrate that success,” Epperson adds. “She may enjoy those running shoes a lot more than the ones you bought because she worked for them.”
Build a First Portfolio
By the time she’s a teenager, she’s ready to learn more about how financial markets work. Stock reports are boring, so get her attention by asking about the lifestyle brands she’s passionate about. Let her pick one company and teach her basic research tools so she can decide if it’s a good investment. Then help her set up an account with enough money to buy a few shares of the stock — and watch it together. “The key is to tailor it to a company or product she’s interested in,” Epperson says.
“You can build on that groundwork by teaching her about diversification through mutual funds or diversified strategies. She’ll understand the importance of risk mitigation by watching her diversified investments weather the ups and downs of the markets better than concentrated positions. When she is ready, let us help. Your Regions’ Wealth Advisor can meet with her individually to help get her comfortable talking about money and investments with a professional,” Carter-Prall adds.
Guide by Example
One of the most difficult challenges in raising financially savvy women today is finding professional role models for them. With the media spotlight constantly focused on trained entertainers, it is harder for young women to get exposure to female business and economic leaders. Help her find strong, financially secure role models who are shaping our world in positive ways, such as Janet Yellen, chair of the U.S. Federal Reserve, and Sheryl Sandberg, Facebook COO and celebrated author, Carter-Prall says. “Help her dream about a successful future and discuss the values of math, economics and science. With the confidence and knowledge you give her, she undoubtedly will thrive in leadership positions at home, in school and in the community.”
Then connect the young women in your life to the professional women in your social circle who can become mentors. “Adults need to connect with these girls while they are still in high school so that they can start visualizing their careers and preparing themselves to be successful,” Epperson says.
Finally, consider getting them involved with nonprofit organizations that promote young women entering professions traditionally dominated by men, such as math, science and technology. “Everyone needs to understand this is an important issue, and we all have to take ownership of it,” Epperson says. “It’s our responsibility to prepare young women to be financial decision-makers, not just for themselves but also for their families.”
