No one is born financially literate. If you didn’t get a seat at the table growing up, I believe you can decide to pull up a seat any time you choose. Sure, it’s helpful if someone teaches you young. At the same time, I want to assure you that it’s never too late to shift old habits even if you didn’t learn personal finance early on.

Source: Global Financial Literacy Excellence Center

According to the Global Financial Literacy Excellence Center (GLFEC), women are lagging behind men in personal financial literacy. The good news? The gender gap appears to be the smallest among Gen Z.

That’s a really good sign for future generations. Maybe when our kids have careers, silent challenges female entrepreneurs face today like wage disparity, access to funding, and navigating tricky personal relationships in male-dominated industries will be a thing of the past.

For now, I plan to keep Gen Z’s momentum going by I’m passing on many of the good money management habits to my daughter that my mom taught me.

When it comes to leaving a legacy and changing the world, I’m starting in my own home.

What is Financial Literacy?

According to Forbes, Financial literacy refers to your grasp and effective use of various financial skills, from budgeting and saving to debt management and retirement planning.

I believe money is a tool we can use to build freedom, so to me, financial literacy is the key to more freedom.

“The best investment you can make, is an investment in yourself... The more you learn, the more you’ll earn.” —Warren Buffett

How I Learned Financial Literacy

Growing up, I learned financial literacy from my parents - my mom, primarily - in a very kid-friendly way. Every week, my mom gave my brothers and me each an allowance equal to the number of years old we were.

Five years old = $5 weekly allowance.

My earliest memory of learning about money was from five or six years old. My mom and I were sitting at a table in the loft of my childhood home. My mom had white envelopes sitting on the table in front of us. She walked me through what it meant to receive an allowance and how to disperse it appropriately into my envelopes.

Our allowance came with some specific rules. We were required to distribute $1 to church, and $1 to college savings, $1 to long-term savings (this was for something more expensive we wanted, like a new bike, for example).

Basically so far, it’s the classic Dave Ramsey envelope method. (Don’t worry. I’m not a Ramsey die hard - it’s just the way I learned to manage money.)

But there was more. Here’s how she taught us to stay out of debt, which is probably the most important part of all.

How I Learned to Avoid Debt

If my brothers or I left one of our belongings laying around the house, my mom put it in “the box.”

“The box” was literally a cardboard box she kept on the floor in the laundry room. Once one of our belongings made it into “the box” - a school textbook, one of our favorite shoes, a class project, our Gameboy - we had to pay her $1 to remove it from “the box.”

This taught us to reserve money for emergencies (and contribute to maintaining a tidy house by putting our crap away!). After all, there were no exceptions and no taking out debt to get an item out of “the box.” It was a simple way for me to learn not to spend money I didn’t have and to save for unexpected circumstances.

mother teaching daughter personal finance

This is still how I manage money to this day.

Now, I’m passing many of these same principles on to my kids:

Your income will likely grow over time but no matter what your income is now, it’s still important to save.
When you get paid, distribute income intentionally.
Save ahead for big expenses.
Give generously to causes that matter to your heart.
Don’t take out consumer debt.

I was one of the lucky ones. Not everyone is fortunate to see their parents handle finances well. I was.

But that’s not the only source I’ve drawn financial literacy from. I’m a prolific reader, so I’ll also share with you resources that have shaped my approach to managing money at the end of this article.

First, let’s talk about 10 ways I’m teaching my daughter (and eventually, my son) how to become financially literate.

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10 Ways I’m Teaching My Daughter How to Become Financially Literate

#1 She gets an allowance.

Every week, she gets an allowance of $5. Eventually this will be based on contributing to the household responsibilities when she’s old enough to understand that if you don’t work, you don’t eat.

For now, she’s learning the flow of money coming in and money going out.

When she gets paid her allowance, she distributes her money by putting $1 in long-term savings envelope, $1 in her church envelope, and the remaining $3 are hers to add to the piggy bank in her room.

#2 She makes decisions about how to spend her money.

When we’re out and about and my daughter asks for something at the store, I ask if she brought her money. I also talk her through whether the thing she wants is an impulse buy or something she planned for.

Both answers are acceptable in the right context and teach her how to have balance around spending.

After all, saving money your whole life only to realize you never fully lived isn’t the goal either.

#3 I’m setting a positive tone for her relationship with money.

I tell her she’s good with money and a smart decision-maker. I’m teaching her she’s capable of handling money. She’s only five so that sounds like:

Way to go counting the money in your piggy bank!
I noticed the _____ you picked out is unlike any toy you already have. How did you choose that one?
How would you grow the money in your piggy bank if you didn’t earn an allowance? You’re smart and I know you’ll figure it out.

I’m heading off any mental block around money before it can even start and before society sends her a negative message that she’s ill-equipped to handle money simply because she’s female.

#4 I let her buy dumb stuff.

She must experience the feelings of buyer’s remorse in a low stakes environment to begin to understand how to spend wisely. Letting her spend her money on meaningless trinkets provides the context to talk about opportunity costs (i.e. the awesome stuff she gives up by spending her money on things that aren’t really aligned with her values).

If she’s not able to work through those feelings now, she’ll end up making a much more costly mistake later in life when more money is involved.

That’s how some people buy houses they can’t afford only to become house poor or have negative equity when they owe more on a car than it’s worth. I’d much rather her learn the lesson now than put her at a disadvantage by making all the spending decisions for her.

#5 I teach her having money isn’t the goal; having freedom is.

Having money isn’t the goal. Having freedom is. Having money provides freedom of time and purpose. I teach my daughter that money is a vehicle to freedom.

Sure, money doesn’t equal happiness, but it can lead you out of some bad situations and into some life changing ones.

#6 It’s a big deal when we contribute to her 529 College Savings Plan.

When my husband and I invest money into her 529 college savings plan, we make it a big deal. We get excited, do a happy dance, and have detailed conversations about what it means with her.

We explain how we’re planning ahead so that she knows she can become anything in the world she wants to be.

And we mean it. We’re building the vision for using her college savings as a vehicle toward a life of fulfillment.

#7 We don’t shy away from using big terms like 529 savings account or “roll it into a Roth.”

It’s okay if money conversations don’t resonate right away; these conversations will be ongoing until she’s an adult, rather than a one-time discussion.

One of my best takeaways from my MBA program was to “speak the language of business.” To me, that means having context to use the terms business-y people use to talk about running a business.

But make no mistake, I had to hear the terms and concepts repeatedly before they made sense. We’re affording the same for her.

#8 She’s part of the “work team” every time we buy an investment property.

Our daughter puts in the sweat equity as we rehab each investment property for renters. She brings her toolbox along. We explain to her why we’re investing in real estate. The truth is, she could very well own those properties someday. To make sound financial decisions, she must grow into a positive money mindset. That starts with first-hand experience about how to create wealth.

For our first rental property where we gutted the entire second floor because that’s the price point we could afford to get our foot in the real estate door, she spent nearly every weekend and evening eating pb&j on the floor and playing make believe while we demo’d.

#9 My internal dialogue is becoming her internal dialogue.

While we grocery shop together, I speak aloud the thoughts in my head as I make decisions about what to buy. Comparing organic to non-organic? I speak it aloud. Doing the math about staying within budget? I speak it aloud. She’s learning what it sounds like to reason through money decisions.

#10 She can’t spend money she doesn’t have.

I’m fully aware consumer debt is a polarizing subject. I also realize debt is often the root of much more than lack of financial literacy.

mother and daughter talking through building wealth

Wage disparity, lack of capital access to capital, and women’s disproportionate share of time spent in family care all have ties to the prolific levels of consumer debt, especially among minorities. According to debt.org, consumer debt hit a record $16.9 trillion at the end of 2022.

Regardless of the reason behind it, debt is a thief and should be used extremely cautiously. Consumer debt drastically inhibits the ability to build wealth.

Our rule: Debt for appreciating assets only.

While there’s far more factors that contribute to debt than simply self-discipline, we’re instilling in our daughter principles around avoiding debilitating debt like the following:

Buying intentionally by saving up for things she wants
Not spending money she doesn’t have
Training her brain about how to earn more by taking risks, negotiating, and aiming high, not scrimping and saving to pinch pennies.

Financial resources for women

Aside from the blessing of seeing good financial management growing up, I’ve also consumed tons of resources about personal finance and investing.

Here are several books I’ve read, most of them more than once:

Lastly, you can’t solely read your way to wealth either. It’s important to be around people who can help you normalize the decisions it takes to become financially literate and build wealth. There are two important communities I’m part of where members normalize good financial decisions:

The Founding Females Mastermind - an online space where women from all over the country connect to grow their businesses
My local Real Estate Investing Meet Up - this is where I surround myself with other people investing in rental property to build wealth. Showing up to the conversation, even though I knew nothing about real estate investing, was one of the best decisions I’ve ever made.

Conclusion

Becoming financially literate isn’t just a skill, rather it’s a lifestyle. It’s repetitive decisions we embody to earn more, avoid debt, and build wealth. It’s the lifestyle - not just the principles - I’m passing on to my children.

How are you empowering yourself and your kids? Share in the comments.

Looking for more inspiration? Here are 10 Ways Female Entrepreneurs are Breaking Traditional Barriers in Business.

P.S. Here are some of my top favorite female small business resources:

Dream, Build, Grow Free Resource Suite - free business templates for your business plan, marketing plan, ideal client persona, financial statements, and more!
Founding Females Community - an online female mastermind space for entrepreneurs to connect, support, and get inspired
Dream, Build, Grow: A Female’s Step-by-Step Guide for How to Start a Business - a guided handbook including everything you need to know from business idea to launch to profiting and scaling your business.

Free Downloads for Female Entrepreneurs

Free PDF Download: 25 Ways to Market Your Business (Aside from Social Media)
Free PDF Download: 33 keys to Business Success
Free PDF Download: SEO Tips for Entrepreneurs

About Founding Females®

Founding Females® Founder, Francie Hinrichsen

The mission of Founding Females® is to help build a better future for female entrepreneurs through education, encouragement, and shared wisdom. We create safe spaces for women to share business challenges and receive peer support.

In addition, Founding Females® offers an online female business mastermind, a how-to guidebook for female entrepreneurs called Dream, Build, Grow: A Female’s Step-by-Step Guide for How to Start a Business, and in-person events, like an annual women’s business conference and local Founding Females Meet Ups.

10 Ways I’m Teaching Financial Literacy to My Daughter

What is Financial Literacy?