Your daughter may be too young to think about investing seriously now, but what you teach her today may make a big difference in her financial future.
Historically, society has not viewed men and women equally with respect to investing. Yet women's economic power is soaring. Today, women make 80% of all buying decisions around the world. In the United States, women now control 51.3% of private wealth. Such attitudes about investing, therefore, need to change, and change fast. What can we teach the next generation to help ensure they grow up to be smart, confident and empowered female investors?
Education is, of course, critical. But I think the answer comes down to more than education. My experiences have led me to believe that women know just as much about investing as their male counterparts. What they often lack is confidence. Alternatively, men often have lots of confidence, and frankly, sometimes shouldn't.
Last September, BMO InvestorLine issued a study examining the confidence levels and different investing styles and priorities of Canadian women and men. The study found that 68% of women feel confident when making investment decisions, compared to 83% of men. When asked why women might lack confidence when investing, the study found that 83% believe that investing has traditionally been viewed as a role for men; 58% reported that society is not as supportive of women investing as they are of men; and 48% contend that women are intimidated by investing.
So while you should absolutely educate your daughter about finances, you should also spend time building up her confidence when it comes to making financial decisions. The following four tips may help you raise a confident future female investor:
Teach her to take risks
Women often take fewer risks than men. Perhaps that can be attributed to genes, or maybe it's simply the way most girls are raised. Whatever the reason, women tend to shy away from volatile investments. But being too conservative with money has lasting repercussions. Odds are, most women will be solely responsible for their own finances at some point in their lives. If you don't take some risk, you may not have enough to live on in retirement. Teach your future investor that risks can also have great rewards. Show her how being at least a little bit of a risk-taker can pay off in life and when it comes to investing.
You may not think of investing as a topic you should cover with your daughter at a young age. Some concepts may seem too complex for a young person to grasp, and they are. You may feel that she should wait to learn about investing in high school or college, or that teaching her about investing is not a critical part of your parenting role.
But evidence suggests that those parents who take the time to teach their daughters about investing at a young age find it pays off. A 2014 Women and Financial Power study by Ameriprise Financial found that many younger women (ages 25-34) reported that they had the opportunity to learn about finances from one or both parents, and this instilled a sense of confidence that was reflected in their financial attitudes and actions later.
So start teaching your daughter simple concepts early. For example, open a savings accounts for her during grade school and have her go to the bank with you to make deposits. Review monthly statements with her and teach her about interest that is earned. From there, you can add more complex concepts as she grows.
Let her try it on for size
Action often cements a concept much better than simply reading about it or hearing about it. Buy your daughter a small amount of stock in one of her favorite companies, or let her invest it on her own. Then follow news about the company and changes in its share price together. It may not all make sense to her at first, but the concepts will sink in.
Be a role model
Financially savvy moms and dads can let their daughters in on how and where they invest, and act as a role model for their future female investor. You might think your daughter will be bored with this, but it's often just the opposite. If you don't know much about investing, consider learning about it yourself and then teaching a simplified version of what you learn to your daughter. Perhaps you can then team up to make some small investment decisions together, or conjure up a pretend competition to see who makes the better picks. Either way, just getting her involved and engaged can go a long way toward educating her and building her financial confidence.
Ryan Wibberley is a financial adviser and founder of CIC Wealth.