Every now and then, you see a survey result that startles you. Then upon reflection, you realize it shouldn’t. I recently learned that 45% of men reported being taught about investing by their parents at a young age, compared with only 23% of women.[i]
As parents, we begin teaching our children basic skills from the moment they are born. They begin as essential needs (talking, eating, avoiding danger) and progress to more refined behaviors (sharing, reading, how to catch a ball). As our children grow, we increase our expectations — music lessons, sports teams, AP classes. Our parental guidance is all to nurture knowledge they will need as adults. Investing is a life skill that we may be neglecting when it comes to young girls.
Age matters. A study done by the University of Michigan found that children have typically developed their emotional spending persona as a “tightwad” or “spendthrift” (their language, not mine) as early as age 5.[ii] Tightwads experienced emotional pain or stress at the thought of spending money whereas spendthrifts were happy to part with cash to satisfy a mild want. Early childhood development suggests that these behaviors can be modified when coached at an early age. Teaching a spendthrift, the power of saving, interest and compounding can help reinforce saving rather than spending behavior. Early lessons to resist the urge to spend immediately in favor of greater gratification down the road resonate. This behavior modification can help establish healthier financial practices in adulthood.
Gender parity has been successful in a host of areas. The number of women earning advanced degrees has skyrocketed. The number of women in the workforce has impressively increased. Yet two areas still lag: pay parity and wealth building. Both are likely symptoms of women’s discomfort with finance and investing. Women are more hesitant than men to ask for compensation increases, earn less, and as a result have less to save. They are also less confident than men in their knowledge of investing despite studies showing that, when women do invest, their returns tend to be higher than those of men. Earning less, saving less and investing less all seem to be behaviors which can be modified with early education and guidance.
Amy Domini, the Chair and Founder of Domini Impact Investments, often reminisces about how her grandfather opened her world to investing as a young girl. These lessons would take place while gardening, at family dinner or in his study. Solid advice — such as “Amy, if you want to learn about a company, start reading the financial statements from the back, forward because all the valuable information is buried in the footnotes” — follows her to this day. Decades later, we can see how Grandpa’s talks not only inspired a solid foundation of personal savings for Amy, but in fact, ignited a passion within her to harness the power of finance to build a better future for all, which helped create the field of sustainable investing.
