Jane Warren on what mothers, and fathers, should be doing to help their children get the most out of their money.
It’s that time of year again. The one day where mothers get a lie in, a card, and, if we’re lucky, a cup of tea in bed to say thanks for all the work that we do.
I look forward to Mother’s Day as much as any other overworked mum. However, the sentimentality of the day can be a little cloying. Amid the avalanche of flowers and soppy cards, it’s important to remember that motherhood isn’t all hearts and teddy bears.
All too often, I encounter the view that mothers take care of the emotional side of parenting, while dads handle the harder stuff, such as saving and investing (despite the fact that household budgets are often controlled by mothers).
The problem with this view is that it reinforces the idea that money and investment is inherently male. Counteracting this (often unconscious) bias is a challenge, not least because so many of us have it drummed into us through our education and social interactions.
At Click & Invest, our research found that women are more likely to feel negative emotions, such as anxiety and fear, when it comes to taking financial risks, while men felt positive emotions of excitement and being in control. Nearly 1.8 million women avoid investing in the stockmarket, choosing instead to play it safe with cash.
If, like me, you have a daughter, this is a worrying trend. I want her to have the best chance of a financially secure future, and having the confidence and knowledge to get the most out of her money is an important part of that.
As parents, we have the power to instil this confidence, but it can be difficult knowing how to have these conversations. With so much information out there, where to begin?
I would start with this: help them to understand the importance of setting and planning for specific financial goals. This might be planning a big trip, building a deposit for a house or saving for a rainy day.
Helping your children to unpack their goals is important to develop an understanding of how long it will take to get there, what the best route is, and how much risk they can afford to take.
This leads to the next conversation, what is the time frame for each of their goals? If they’re looking to build a pot of money for a big trip within the next three years, using a savings account may be the best option.
However, if they want to save for a deposit for a house at some point in the next 10 years, investing in the stockmarket is likely to get them there quicker.
It’s important to encourage a long-term view to financial planning, particularly when it comes to investing, as compounding interest rates mean that they can end up with much more money than they put in.
Third, let them know that a little bit really does go a long way. I don’t believe that we are doing enough to educate young people about investing - even small amounts can lead to big rewards over a long period of time.
Choosing to invest any spare or non-emergency cash - they should have an emergency fund first - over the long term could result in higher returns than just saving into a bank account. Of course, alongside this must sit a healthy understanding of risk, and what this means when investing in stocks and shares.
The most important lesson to teach, however, is simply to go for it. Don’t let them put off making decisions with their money. It’s never too early to plan for their financial future.
Helping them to get their financial ducks in a row is essential and one they will be thankful for in the future. And who knows, maybe it’ll lead to bigger inflows of flowers and chocolates down the line.
Jane Warren, CEO of Click & Invest.