The Most Important Thing You Can Do As A Parent Is To Teach Your Daughter About Investing
The gender gap in investing has been closing for years. But while that progress is promising, we still have a long way to go.
One of the best ways for women to become comfortable with investing is to start while they’re young. Like with any topic, gradually exposing them to the nuances of managing a portfolio will help them grow into confident, savvy investors.
Even if society tries to tell them that managing money is a man’s game, you can empower them to know their worth — and grow their worth — with these strategies.
Use Female Role Models
When most people think of an investor, they’re likely to conjure up the image of a white man in a suit. Think Leonardo DiCaprio in “The Wolf of Wall Street.”
In reality, the investing world has been diversifying rapidly for years. Representation matters, so show your daughter what female investors look like.
“My daughter was much more receptive to female role models, so I turned her on to people like Erin Lowry, Bola Sokunbi, and Farnoosh Torabi,” Joe Saul-Sehy, host of the Stacking Benjamins podcast told us. “She and I would then chat about what she’d found from each of these great women, and I worked to reinforce it. Today she’s an avid investor, and I think that had a lot to do with it.”
Once your daughter is old enough to have social media accounts, she can start following these women online.
It’s hard to get kids to think long-term. To encourage your daughter to start investing, offer to match whatever she contributes. Seeing faster returns should help to stoke her enthusiasm.
This process will also prepare her for the workplace, where employers commonly match contributions.
Talk About Volatility
The concept of volatility is one of the most important lessons children should understand about investing. Volatility refers to the ups and downs of the market and is one of the most crucial aspects of investing.
The stock market can seem like a rollercoaster to inexperienced consumers, and many get cold feet when it comes time to put their hard-earned money down. But if you start teaching kids about volatility while they’re young, they’ll have time to see that the market always rebounds.
Author of Money Letters 2 My Daughter financial expert Jackie Cummings Koski started teaching her daughter Amber about investing when she was in middle school. She used market downturns as teachable moments, so Amber gradually came to understand what was going on and why it was a normal part of investing.
Now 21 years old, Amber says she’s not anxious when the market plummets.
“It’s not as scary as it is for other people who think they’ve just lost all their money,” Amber shared. “Having exposure to investing in general when I was younger helped me digest what is currently going on in the world in terms of stocks and investing.”
Give Her Ownership
If you have a 529 in your daughter’s name, show her those monthly statements regularly. Talk about how much you’re saving for her college education and what you’ve invested that money in. Let her watch the money grow every year.
“Even at 9 years old, my daughter loved seeing her name on her college savings account,” Cummings Koski said.
When your daughter turns 13, go with her to open a bank account in person. If she runs a lemonade stand or sells homemade crafts, go with her to deposit the cash proceeds into her bank account.
You can then encourage her to split the money between spending, saving for short-term goals, and investing.
Buy Shares of Stock
Individual stocks are an easy way to teach your daughter about investing. Let them invest in companies they recognize, like Disney, Hershey, or Netflix. You’ll have to open a custodial account with them if they’re under 18, but it’s a fairly simple process.
Open an account with an investing company like Stash or Robinhood, both of which let you buy fractional shares of stocks. Here’s how it works: One share of Amazon currently costs $3,044.65, which is unaffordable for most investors. But apps like Stash let you purchase $50 of Amazon stock.
Consider including stock shares when you’re buying birthday or Christmas gifts. For example, if you’re buying your daughter a new Apple laptop, include a share of Apple with the gift. This makes investing feel more concrete.
Encourage grandparents, friends, and other relatives to purchase stocks for your child as well.
Talk About Your Own Investments
Talking to your daughter about your own investments will help it seem more real for them. Encourage her to ask questions about any concepts she doesn’t understand and be open about your successes and failures.
Cummings Koski advises parents to explain investing terms in five words or less, like saying that a mutual fund represents a basket of stocks. If they already have their own stock portfolio, they’ll understand what that means.
Find a set time every month to check their portfolio, track any major changes and help them decide if they want to buy or sell some of their securities.
Feature Image: The Money Manual