Conversations to have with your daughters to ensure their financial wellness

By Louise Stevenson, investment advisor
RBC Dominion Securities, Inc.

We all want our daughters to grow up to be strong and independent, but children often model the behaviour of their parents.

Remarking on a 2020 survey that noted worldwide financial literacy rates of 15-year-old students, the Financial Consumer Agency of Canada reported that the results found that “teens who talked about finances with their parents, even just once a week, scored 33 points higher in financial literacy than those who did not.”

“Higher levels of financial literacy in students are associated with confidence in keeping track of their account balance and planning their spending with consideration of their current financial situation,” noted the agency.¹ “Both are key factors in building a financially secure future.”

Do you remember watching your parent(s) balance their chequebook? I do. The advantage of technology is that we now have access to great apps and data, but the downside of our tap culture is that it’s so easy to tap away without paying real attention to our purchases .

The next time you find yourself with your daughter safely tucked into the seat beside you in the car, here are some topics you may want to discuss:

1. Set up two accounts to make budget management easier

Once you’ve established your monthly budget, transfer the monthly total to the “spending” account (likely a traditional chequing account), keeping any excess in the second (likely a savings account). This can help you (and your daughter) establish better spending habits and ideally live within your budget.

2. Don’t ignore the power of compounding

We’ve all heard the advice to “pay yourself first.” There’s future financial wellness in that statement. If, at age 20, your daughter started saving and investing $361.04 per month, or roughly $12 per day, based on a five percent rate of return, she could be a millionaire by 65.

If she balks at that amount, I’m not going to be patronizing and ask her to forgo her latte (thank you, Sallie Krawcheck , co-founder of robo-advisor Ellevest Inc., for clearing that up), but I’m going to suggest that investing in herself and her future is absolutely worth it and the earlier she starts, the better. That monthly amount increases to $698.41 if she waits until she is 30.

3. Teach her the importance of financial independence

As your daughter enters adulthood, it’s crucial she’s already taken steps toward achieving financial independence.

Some benefits you can talk to her about include:

• The ability to cover living expenses, including accommodation, food, transport and lifestyle costs without the help of parents or a partner
• The ability to save for the future, such as for travel, buying a home and retirement
• The option to walk away from toxic relationships
• The ability to be the sole person to make decisions about how, when and where to spend your money

4. Encourage lifelong learning in financial literacy

Suggest she read books such as The Wealthy Barber: The Common Sense Guide to Successful Financial Planning by David Chilton and Prince Charming Isn’t Coming: How Women Get Smart About Money by Barbara Stanny; play a financial podcast in the car; watch young (and hopefully engaging!) experts on YouTube—anything that will spark her interest in the topic.

Or, consider matching your child’s contribution to an investment account (perhaps a tax-free savings account if they’re over 18) and use this as an opportunity to discuss their investment choices. You could also suggest they complete the Canadian Securities Course , which is an entry level course required in the investment industry and provides a good overview of everything from investment products, family law and estate law.

5. Encourage her to seek the advice of an advisor

Research has shown that working with a good advisor can have a significant impact on future wealth.

I would encourage your daughter to pick an advisor with whom she feels comfortable asking questions and one who wants to partner with her, thus instilling confidence to own and lead her own journey to wealth.

This article was originally published in the Financial Post.