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What Should I Tell My Daughter About Managing Her Money During Her Lifetime?

Presuming that your daughter is fairly young, there are many appropriate ideas that should help her. All of these require patience and time, and it may be difficult at a young age to see the long term benefits of saving and investing, but if anyone starts early and is wise with their money, they will most always have savings in reserve and perhaps can realize their dreams.First to learn is that things “on sale” do not save you money. They cost you money. You don’t SAVE anything. You SPEND. Yes, you could argue that you SPEND LESS because something is “on sale”, but you still will have less money in your pocket that you did before the purchase.

So ask yourself, do you REALLY NEED that item you are about to buy? Will it boost your self-confidence, or provide you with endless hours of pleasure, or simply end up in your closet, or in a drawer, or on a shelf somewhere gathering dust?

If you can live without it, then DO NOT SPEND the money and instead put the money away. Not in a place where you Moneycan easily lay your hands upon it; not in a drawer, or a jar or a piggy bank, or somewhere in your home. Open a savings account at a credit union – they pay more interest than a bank. Even though they pay miserable interest these days, put your money away. Save it. Keep it. Spend it only if you absolutely have to use it for something urgent – that does not mean the latest fashion or pair of shoes, or even a gift for someone.

If you do this and repeat the behavior again and again and again, you will discover, as my daughter did, that someday – in her case about the time she entered college – it totaled over $10,000. That sum came from saving cash gifts, from adding baby-sitting money – from doing odd jobs – from actually holding a job once you she was old enough to do so.

Once you are in the $10,000 club, consider taking some of it – perhaps one-fourth of it, or about $2500, and putting it in to a no-load (no upfront fee and usually lower internal cost) mutual fund.

That first mutual fund purchase should likely be a large cap value fund. If you do this, don’t panic and sell it if it declines in value. Instead add more money to it the next time you have more cash to deposit into savings. Keep adding to it. Put half of your new deposits into it. When the amount you have in the large cap value fund equals $5,000, put your next $1000 in a second no-load mutual fund. This time pick a mid-cap value fund.

From now on, put one-third of your money in the savings, one-third in the large cap value fund, and one-third in the mid-cap value fund.

It will take time– perhaps another ten years – and patients are required, but you will eventually reach $20,000, then $30,000, then $50,000 and each step will take less and less and less time. Keep saving and putting all you can away.

You will eventually have enough money to use as down payment on a home, or perhaps a piece of rental property. Don’t use all of your money to do that, always have reserves in case things don’t go as planned. Always put money away and keep on investing. You will be an adult then, so perhaps buy your first house, then someday a second and rent it out, then a third, and rent it too. Over time you might own several homes.

You should also someday seek out a well-educated, (preferably in finance not sales) well-trained professional investment advisor, who is also a fiduciary – that gives you extra protection – and grow a portfolio, and always continue to save.


What are your thoughts? Any suggestions you’d like to pass along?

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