When you teach your children about money, you have to be aware of the unspoken messages you impart to them — especially to your daughters.
My parents always told me that the sky was the limit, and that I could be anything I wanted — but their actions told me something different. When my brother was 12 years old, he was gifted 200 shares of stock for his birthday. When I turned 12 the following year, I was filled with anticipation of receiving my very own shares. But none came.
I am sure I received a wonderful present for my 12th birthday, but for the life of me, I can’t remember what that gift was. All I remember is that I didn’t get stock shares like my brother did. The unspoken message I heard was, “Investing is for boys.”
Years later, remembering these messages from childhood, I’m not surprised when I read the research on women lacking financial confidence.
Fortunately, I found mentors in college who encouraged me to go into financial planning. I heard the message loud and clear: Financial planning (and investing) are for women, too.
However, many women grow up without this type of guidance. As a result, women still lag behind men when it comes to confidence in making investment decisions, being on track for retirement and saving for retirement.
Women admit their lack of confidence freely: In a recent study from Wells Fargo on affluent women (with investable assets of $250,000 or more), 41% said they were not at all confident in their investing ability. Additionally, according to a study by Prudential, only 10% of female breadwinners felt very knowledgeable about financial products and services.
Moreover, women lag behind men when it comes to retirement preparation. A 2013 Ameriprise study on retirement contributions reports that fewer women contributed to 401(k) plans than men, with only 47% of women contributed versus 55% of men. The women who are contributing are contributing less than their male counterparts, as well. A newly released study from Wells Fargo reported that 43% of men are saving at the recommended “contribution index” level — a target rate of 10% including employer match. Only 39% of women are contributing at the recommended level.
How can we start our daughters and granddaughters off right financially?
Here are five financial skills to teach your daughters during their formative years that they will never forget (and may just thank you for later):
- Negotiating is fun.
Negotiating is an important skill. Research has shown that even a slightly higher starting salary can jumpstart your earning potential. A study by George Mason University and Temple University showed that an employee who negotiates and starts his or her career with a salary of $55,000 instead of $50,000 (with 5% increases each year) would earn over $600,000 more in income over a 40-year career.
(See this post – 7 Financial Decisions Made in Your 30s That Can Haunt You in Your 50s)
My 4-year-old god-daughter Lauren has earned the nickname “the great negotiator” both at her pre-school and at home. All young children learn this skill, but Lauren seems to have a special inclination for it.
Her father, a financial advisor, though worn out by her constant challenging to get more from every interaction, encourages it because he wants her to get the most from her money as she gets older. Learning to ask for what she wants is a lesson that will pay off later in life.
- Delay Gratification
In the classic “Marshmallow study” by Walter Mischel, PhD, a psychologist now at Columbia
University,” and his colleagues, found that preschool children who were able to wait a few minutes in order to get two marshmallows instead of being given one immediately performed better on the SAT as teenagers.
Additionally, their parents were more likely to rate them as “having a greater ability to plan, handle stress, respond to reason, exhibit self-control in frustrating situations and concentrate without becoming distracted” than the children who grabbed the one marshmallow and ate it right away. Later experiments found that the willpower of the subjects continued over four decades.
Obviously, delayed gratification is paramount to saving for goals and retirement planning for adults. Encouraging children to save part of any allowance and gifts of cash they receive can go a long way toward creating financial secure adults.
- Speak up, voice your opinion and make your own decisions.
Autonomy in decision-making helps teenagers to be less susceptible to peer pressure when growing up. The last thing parents want is for their daughters to go from listening to them to listening to peers instead of learning to think for themselves.
There are ways to foster independent thinking. Research by Charlotte Geary at the University of Virginia found that 16-year-olds whose mothers undermined their autonomy during conflict resolution were high in susceptibility to peer influence.
According to the research, teens who participated in joint decision-making (talking things through with their parents) were less susceptible to peer pressure at 18. Autonomy seems to be a consistent trait over time and across social relationships.
My niece, who is raising two girls, recently shared with me that she and her husband support their daughters (ages 4 and 6) in speaking up. They ensure that their daughters know that they have voices that are valued in their household. “The parents make the rules and always have final say, of course, but at the same time, the girls are individual people and their opinions are valued,” she said.
This kind of support sets the stage for open dialogue and joint decision-making when the girls become teenagers. Hopefully a side benefit would be making those teenage years a little easier on the parents, too. (I’ll have to ask her how that goes.)
- Enjoy the effort more than the results.
Research has shown that praising children for their intelligence may undermine their motivation and performance. For example, when you recognize the work children put into a task (“You worked really hard on this project and it paid off”) rather than their intelligence or ability (“You are one smart kid”), they develop a stronger work ethic and become more motivated.
After a failure, fifth graders recognized for their intelligence displayed less persistence, performance and enjoyment of tasks than the students who were praised for their efforts.
- Travel lightly in this world.
Materialism can breed unhappiness. Research on marital happiness has shown that couples who are materialistic rate at the bottom of the happiness scale. A study by BYU and William Paterson University found that spouses who were both materialistic were worse off on nearly every relationship measure they examined. It wasn’t a lack of money that was the culprit; the authors found that it was materialism itself that created much of the difficulty even when couples had plenty of money.
Consider, too, not just your overt messages but what unspoken messages you are sharing with your children. I remember telling my son what a nice job he did making his bed as I reached down to tuck in the blanket at the corner. I didn’t realize at the time that I was giving him mixed messages — “It’s good, but not good enough.”
On your child’s 12th birthday, gift him or her some shares of stock or mutual funds, and walk him or her through the annual report to teach them about their shares. In particular, show your daughters early on that investing is for girls, too.
This was originally posted on my Forbes.com contributor blog under the title, Teach Your Daughters Money Lessons They Will Never Forget.
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