When families are blessed with little girls, the initial thoughts that come to mind are often of frilly dresses, shopping trips and weddings. While these things do make for wonderful memories, they all come with a price tag attached. Every trip to the mall and walk down the aisle costs money.Keeping that in mind, teaching your daughter about money and basic financial activities may be the gifts you can give that can last for a lifetime.
Talk to her about money and teach her the basics
- By simply talking to your daughter about money, you will expose her to the topic, increase her knowledge and ideally, engage her interest in a subject that will be an important part of her life.
- There are a host of financial activities that are simply a part of everyday life. The basic tasks associated with banking, such as, writing checks, borrowing money and paying interest, occur on a monthly basis in most households.
- Give your daughter a head start by teaching her about the basic financial activities that take place around her on a daily basis.
Introducing her to budgeting basics
- Learning how to properly manage a budget is one of life’s most valued skills; both spending and saving habits can be taught early on.
- Start by giving your child money and letting her make decisions about how to spend it.
- After your daughter has made a few purchasing decisions on her own, she will have a better understanding of the value of money, the limitations of purchasing power and the need to save money, if the item she wants costs more than her allowance.
Foster a culture of saving
- Open a savings account at your bank for her; many banks have interest-bearing savings accounts especially for children.
- Having her own bank account is an important step in teaching her to manage her money.
Teach her to invest
- When you are ready to move beyond the basic tenets of spending and saving, it’s time to educate her about the stock market, mutual funds and other investment avenues.
- Once you have introduced your child to some basic concepts of stock trading, you can sit down together allow him or her to select a company. If you have the money, you can buy the stock and track it with your child. If you don’t have the money, make an artificial portfolio and track the stock.
- As they grow older, encourage them to start investing in mutual funds to save for say, college or another major expenses.
Education and marriage planning
- In addition to putting away money for your own retirement, you’d like to have an account earmarked for your child. As she gets older, you’ll be able to tell her that she has this account, and at a certain point, having watched it grow from acorn to oak, she’ll happily take shelter in its shade.
- Key points to keep in mind:
- Before preparing a financial plan, you must evaluate your children’s future needs, and then start working towards chasing those ‘need based goals’. Forecast the expenses that may arise in future, keeping inflation in mind.
- Begin the process of saving and investing early. This will enable you to create an adequate corpus for the fulfillment of your children’s desires and ambitions.
- The financial decisions which determine your asset allocation and portfolio mix should be backed by your risk tolerance level and risk appetite.
- Never dip into the funds saved for your other priorities (retirement, medical expenses, housing rent etc.) to fund your child’s goals.
Insurance
Have her as the beneficiary for your insurance policies. This will ensure that in case of any eventuality, she is financially guarded.
Other pointers:
- Buy a property in your daughter’s name.
- Assign her as the nominee for your investments and savings account.
- Make her the executor for your will.