Like most parents I know, my wife Tracy and I divide up the many pieces of that puzzle called ‘parenting.’ Being the CFP® in the family, teaching our girls about money and finance falls firmly on my shoulders. When I first began to delve into this piece of our daughters’ education, I did my research. After all, just because I know about finance myself doesn’t mean I had any idea how to teach it to my kids! So I observed how many of my friends and colleagues were teaching their own kids about money, I read great books on the topic, and I drew on the education I received from my grandfather when I was young. (You can read about that adventure in my article Financial questions? Turn to your ‘wingman’!) The result was a three-pronged approach that my girls actually seem to love as much as I do:
- Start early and keep it simple. I first began teaching my daughters the basics of money when they were in early elementary school. Back then, I kept the concepts very basic. I gave them piggy banks that included slots for each of the key financial priorities: saving, charity, investing, and spending. This helped them understand the idea of delayed gratification and to learn that moderation is always the best policy! I also talked to them about what a stock is, focusing on the fact that every share is a small piece of a very real company. (One misstep I made in the early days: I thought taking them to the youth-focused Chicago Fed’s Money Museum was a great idea, but it was complete overkill. At this age, the key is to keep it interesting by keeping it simple!)
- Invest early and often. I’m a true believer in the fact that you can’t begin investing early enough! That’s true for adults and kids alike. Once my daughters were old enough to move beyond the basics, we started following a handful of stocks together. Eventually, Tracy and I began giving them a little bit of money on their birthdays to buy ‘pieces’ of companies that they chose themselves. Once their small portfolios were in place, we would sit down four times a year to look at their investments and track their gains and losses. Mostly, we would talk about what each company was doing to make money and why the girls thought each business would grow—or not—over the next five years. Sometimes they would choose to stick to the strategy in place. Sometimes they would choose to sell, buy, or reallocate. Over time, how their choices played out has shown them why a great strategy matters more than what the market is doing in the moment, and the strength of investing for the long term.
- Get them involved in the process. When the girls each turned 12, I finally got to share with them one of my favorite pastimes from when I was a finance-obsessed pre-teen: going to shareholder meetings (yes, I was born a finance geek!). Believe it or not, there are quite a few companies that go out of their way to make their meetings kid-friendly. Disney promotes a kid-friendly Q&A. Warren Buffett encourages kids to attend the Berkshire Hathaway meeting. Every year, I take them out of school for a day so we can trek to one of my favorite meetings in the Midwest. While I sit through the six-hour session to hear the CEO and vice chair take questions on the business, I let the girls roam freely between our seats and the fantastic exhibit hall. After the meeting, we all head out to a nice dinner together. I love hearing about the companies whose exhibits piqued their interest, sharing my own thoughts about the Q&A with management, and answering their questions. Every year, I’m thrilled to see their knowledge and their passion grow.
Almost every day I stumble across a story in the press about the need for greater financial literacy among women. As parents, we can help make that happen by exposing our daughters to the world of finance. Every child needs to be given the tools they need to become wise with their money, but for our daughters to grow into financially confident women, we need to give them every opportunity possible. Whether you use my approach or one based on your own knowledge and research, I urge you to take steps now to make financial education a priority. Together we can raise a generation of well-rounded, intelligent women who can add financial literacy to their long list of achievements!