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By Anna Smith
Special to Financial Independence Hub
As a mother, I know the importance of raising my daughter to be independent and confident. One of the most significant ways I can do this is by instilling in her the value of financial literacy. By teaching her to be financially independent, I am setting her up for a future where she can make sound decisions with money and have the freedom to achieve her dreams. I feel every mother should share this responsibility and nurture the financial skills of their children, especially when we consider the uncertainties of the current global economic climate.
Growing up and learning to manage money through lived experiences, I discovered that some of those life lessons can be painful. My immigrant parents were so focused on working hard to provide the basics for the family, financial literacy lessons weren’t really a priority for my sister and me. All we were taught was to save and keep on saving. In fact, my sister and I would sometimes skip lunch at school just to save the allowance our parents gave us. I learned the hard way that while saving is part of being financially literate, it can’t just stop there; a significant next step is to find safe, reliable methods to growing your wealth.
Not knowing better, when I was 18, one of the earliest financial mistakes I made was getting multiple credit cards, which eventually resulted in a lot of debt (because which teenage girl doesn’t like shopping?). I had to work hard to pay it off and it was a tough lesson to learn, but it was valuable because it made me realize the importance of being smart about money from a young age.
After that, I started seeking support to become more financially literate from any source I could get my hands on. The internet was my best friend and I got into the habit of listening to podcasts about investing and best financial practices. When I started working, I was lucky enough to find a trusted mentor who taught me that putting 75 per cent of my paycheque toward smart investments was smarter than spending the money on any big-ticket item immediately.
As I became better with money, I went from only knowing how to save money to growing my wealth through investing in stocks (ETFs) and real estate and having a diverse portfolio. When it comes to investments, I now know it’s important to maintain both passive and aggressive investments. Having said that, choosing between good investments and bad ones can be daunting and that’s where financial advisors come in. Engaging a trusted advisor who is experienced in investing in different asset classes can make all the difference in the world because they often have access to wealth management tools and data that make investment proposals more reliable and easier to understand.
Teaching children about saving and investing — and the mindset behind both
Although I eventually found my financial footing, others are not so lucky and many have never been able to recover once they get into debt, which can be crippling. Now that I have a family of my own, one of my top priorities is to make sure my daughter has a strong foundation in financial literacy, with all the tools she needs to make better decisions when managing money.
One of the things that we’ve started working on together is to get her to save regularly, like I did as a child. But more than teaching my daughter good saving habits, I believe what’s important is to show her the difference between the money-going-out and money-going-in concept. Very often, children are no strangers to the former because they see us making purchases daily and this makes it easy for them to learn spending (or worse, impulse spending). The latter, however, is more difficult to emulate because they rarely witness the act of saving. This is especially true now that we live in a world where most financial transactions are digital. Though this speaks to the convenience of innovation, how do we curb impulse spending in our children beyond merely saying “no” (and parents, I’m sure you’ll agree that saying “no” doesn’t always elicit the best response from children)?
My solution is a simple one. Set up three separate bank accounts: a custodial, an educational savings, and a regular savings account for my daughter and take her to the bank to deposit money every time she gets an allowance. I believe that managing a custodial account for her and eventually showing her its growth and difference from her savings account will teach her passive and aggressive methods of accumulating wealth. More than that, allowing her to handle physical currency will greatly accelerate her understanding of and passion for financial literacy because it is empowering to be trusted with something that will eventually increase buying power.
This can also curb impulse spending because it teaches her that she won’t always get what she wants instantly. The value of delayed gratification is an important one when it comes to money management in children because it encourages them to think about their decisions (what they should buy now versus what they should buy later) and set spending goals to afford anything from applesauce to a coveted video game. More than that, it allows them to witness first-hand the growth of their wealth, which gives them control and good management of their money from an early age.
Beyond teaching my daughter the importance of saving, I want to make sure that she understands what she can do with her money so that it experiences steady growth over time: smart investing. With so many options out there, the potential rewards and risks of investing are endless. By understanding the benefits of compound interest and the concepts of diversification and risk management, she will be able to better determine opportunities that could yield the highest returns.
At the end of the day, teaching our children about financial literacy is an investment in their future. By equipping them with the knowledge and practical experience they need to make informed decisions about money, we’re not only setting them up for financial success but also for overall well-being. As parents, I believe that we have a unique opportunity to give our children a lifetime of financial independence and freedom, all by providing them with the tools they need to manage their money ethically and wisely. By starting early and being consistent in our approach, we can help our children to embrace the power of financial management and become capable, confident adults.
Anna Smith is Head of Marketing at CapIntel, a leading financial technology company that supports wholesalers and improves the day-to-day workflow efficiency and fund analysis for financial advisors. Anna is a passionate, energetic and results-driven leader who channels her excitement for financial literacy in her marketing of the cutting-edge products and services of CapIntel.
With nearly a decade of experience in B2B SaaS, she is an expert at creating strategic marketing approaches and providing data-driven insights for financial advisors and the wealth management community. Moreover, she is a proud mother of one, and an extreme sports enthusiast, spending her free time mountain biking, snowboarding, and backcountry camping. On top of that, she loves cooking, spending time with her family and two dogs, volunteering in her community, and travelling. Whether she’s managing her own finances or leading a world-class team of marketers, Anna credits hard work and a healthy curiosity as key ingredients for success.
