As a father of three daughters, I recognise the role the generation below me will play in levelling the playing field of the superannuation imbalances of women vs men at retirement.
Any number of google searches will confirm the stats that women currently retire with significantly less super in their own names, than men. The reasons for this are many and varied, but include taking time out of the workforce to have kids, the inequity of wages between sexes and also the lower appetite for females to take on investment risk compared to males. Some recent research suggests the super imbalance will take another 40 years to close the gap; I hope they are wrong and the motivations of my girls lead to a significantly shorter timeframe.
So what financial planning lessons do my wife and I have to prepare our girls for financial success in adulthood?
- Let’s start with making it fun. My kids love playing “Payday” which is a bit like Monopoly but has more dealmaking and focuses on managing expenses. It also introduces the concept of opportunity cost.
- Then start actually investing early. I can’t remember most of my birthday presents as a kid but I remember as a teenager when a family member transferred a few shares rather than a forgettable gift. It was the late 80’s/early 90’s so I didn’t make much but the concept of shares was familiar to me before leaving school. I hope my girls will aim for the same start.
- Educate, educate, educate. Arguably this should be number 1 but unless the idea of investing is familiar to them, they’ll never really take an interest. We’ll start with more motivational (rather than technical) books and articles.
- While you’re young and healthy, insure yourself. The biggest financial asset my daughters possess currently is their potential to generate an income in the future and it is worth protecting.
- Pay yourself first. Most financial self help books are underpinned by this concept: set aside money from wages to be invested first, then live on the rest. Unfortunately our society is very good at spending money first, then paying credit card interest indefinitely. If they start investing young enough and embed the behaviour of ‘paying yourself first’, hopefully they won’t fall into the credit card trap.
Lastly, I‘ve met fabulous savers and investors who have built an investment portfolio as a headstart for their kids. When they are “old enough”, the money is handed over and the kids are incredibly thankful; then some kids toast the money! That headstart has essentially accelerated the behaviour of spend first, pay later.
The message is that if my girls have got some investment background, interest and discipline, they’ll enter adulthood with a mindset that will help correct the super gender imbalance, ideally sooner rather than later.
I’m always happy to have a chat with clients about how they can help their kids (or grandkids!). I’ve got a library of good books and articles suitable for fresh minds looking to start out…ultimately, the key is just to start.