What Financial Skills Should I Teach My Daughter?

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What financial skills should a kid have before they go to college? — Lawrence, P., Omaha

If they’re still in the college search process, the number one goal should be making them a smart consumer. Sure, it’s great to go to that big-name school if you can get in, but make sure you’re getting what you pay for. “My advice to families is to have that hard conversation,” says Susan Teerink, director of financial aid at Marquette University in Milwaukee. “Say, ‘this is what we can afford,’ and set expectations.”

If your kids are taking out loans to foot the bill, it’s important to teach kids to borrow only what they really need. When schools dole out federal loans, they factor ancillary costs like room and board and textbooks into the package. So after the tuition is paid, some students get money back in the form of a student loan refund.

Before they start spending that cash on a new wardrobe, they need to understand that they’ll have to pay that money back — with interest — after graduation. Teerink says they can ask their financial aid office to only get part of the award, or simply return part of the refund to lower their loan balance.

Once on campus, it’s also important to develop some good budgeting skills. That’ll help them avoid another trap that students can fall into: Racking up hefty credit card bills.

Several years ago a federal law called the CARD Act barred companies from setting up shop in the middle of campus and offering free t-shirts and Frisbees to entice students. But those same card issuers can still target kids at nearby hangouts – not to mention through social media and other digital platforms.

So by all means, talk to your son or daughter ahead of time about how to manage their expenses. If they have a job that will allow them to pay off the balance each cycle, having one credit card probably won’t do any harm. If not, a good way to build credit is with a secured card that only lets them spend up to the amount of their refundable security deposit.

It’s hard to teach teenagers that the decisions they make today have long-term consequences. But the more willing you are to engage them now, the better your chances of heading off any disastrous choices.

I read that parents pay boys twice as much as girls for allowance. How can I make sure not to repeat this mistake? — Jerry, New York

It’s bad enough that women get paid less than men in the workplace. But the idea that pay disparities start with mom and dad? That’s pretty shocking.

Yet, that’s what a number of recent findings point to. One survey of 10,000 families in the U.S. found that boys averaged $13.80 a week in earnings while girls made just $6.71. That’s right: males are getting twice as much from their parents.

How exactly does this happen? For one, boys often get paid for tasks that girls don’t, like brushing their teeth or cleaning their room. If most American households are like mine, you don’t have to hound girls as often to get those things done. And, because there really is no justice in this world, their reward for good habits is less money.

Another interesting discovery was that parents tend to assign jobs that required muscle-flexing, like cutting the lawn, to boys. And parents tend to pay more for those than the cleaning dishes or folding laundry, tasks that girls are more likely to get.

To fix all this, we really have to be aware of these unconscious biases. “The easy answer is to pay the same weekly allowance for everyone, no matter how many chores they do,” says Mike Prusinski, president of BusyKid, the Kid’s Chore Chart App company that also conducted the survey.

Of course, some parents (me included) like a pay-for-performance system. Even then, there are ways you can avoid underpaying your daughter. For example, you could mix up the chores and have a girl do some of the yard work while your son learns to fold clothes.

Also, make sure you regularly pay up for chores that are already done – a clean bedroom, for example – not just the ones you need to nag your kids over. If anything, your kids should get a bigger reward for being proactive.

Are there financial lessons I can teach my daughter to give her a head-start? — Paul K., Kansas City

When it comes to the big financial lessons to pass down to your kids, there should really be no difference in what you tell boys or girls. Are girls going into the workplace at a disadvantage? Most signs still point to yes. But will they be all the more disadvantaged if they don’t have the basic financial lessons on lock-down? Most definitely.

So at the risk of sounding like your own parents – or grandparents, or great-grandparents – start by teaching her the value of a dollar. Once she’s old enough to take on bigger tasks, like babysitting or grass-cutting, I think it’s great when kids start earning their own cash. I guarantee you, the $5 they earned through hard work is a lot more precious than that five-spot you just stuck in their pocket.

Get them to keep a budget for whatever income they earn. We’re not talking about an elaborate spreadsheet here, just a basic plan that regulates how much of the pay goes to short-term needs versus long-term ones.

Even if she sets out a simple goal like putting 50 cents for every dollar earned into a savings account, it’ll go a long way. Maybe she can pinpoint something big she really wants to save for, like a new phone or a pricey pair of shoes, as motivation.

There’s some evidence that the simple act of managing a savings account helps build responsible habits. One study of 15-year-olds in the U.S., for example, showed that those who have an account scored 22 points better in financial literacy than those without one.

It’s pretty basic, but there’s no more important financial lesson than learning to spend less than you earn. Once they understand that, they should be able to make smart decisions in college and beyond.