Successfully managing money, no matter what your age or stage of life, is an important goal for everyone. In fact, there is no better gift you can give your daughter than the gift of financial literacy, particularly given that so little about financial awareness is taught to our children at either school or university. Today’s article will build on some of the basic financial starter tips outlined in our recent “Getting Started: Financial Tips for Your Teenage Daughter” article. In our recent article, we advised you to discuss important money basics with your daughter. These included topics like know her income, create a budget, track and balance the budget, and open a savings account. Following are some other key tips that we suggest for your daughter as she starts out on her career and a lifetime path of financial awareness and management.

Start An Emergency Fund

Without relying on credit cards or high-interest loans, emergency savings provide a financial cushion that can keep your daughter afloat in a moment of need. Having an emergency fund is crucial since it can help your daughter avoid borrowing more if she has debt. Emergency funds might cover things like unexpected medical bills, a loss of job, and household or automobile repairs, for example. The amount your daughter should put aside varies but a fair rule of thumb is to have enough money to cover three to six months of living costs. Keep in mind that she may require more if she freelances or work seasonally, or if her job is challenging to replace.

Open a Systematic Investment Plan (SIP)

Teaching your daughter about the importance of investing is one of the most important elements of preparing her for her future, but it can also be confusing and time-consuming if she has a busy career. Automating her investment plan can make things much simpler and remove that overwhelming feeling. A SIP is one of the easier ways to automate investing while helping mitigate the risk of timing the market. SIPs help you build up your portfolio by letting you invest a small amount at periodic intervals: weekly, monthly, or quarterly. This money is then invested in the mutual fund of her choice, thus leaving the management of the money to a full-time professional. If you haven’t done so already, encourage your daughter to talk to her bank, advisor or mutual fund company to get a SIP set up today.

Save for Retirement

As you probably know, retirement planning is likely the most important financial goal for every single one of us. While it will likely seem like a long time away for your daughter just starting out her career, this is the single most important plan that your daughter should start saving for as soon as she starts working. In short, it is the process of preparing today so that she can achieve her goals and dreams for the future. It’s important to remind her that retirement often lasts longer than she thinks, particularly for women who, on average, live almost 3 years longer than men in India (According to the World Health Statistics report of 2021) . She should be putting aside at least 10-15% of her gross salary, and don’t forget that there may be a plan at her workplace that she can also take advantage of.

Establish a Credit History

As your daughter embarks on her career and a lifetime of financial management, now is a good time to start establishing a good credit history. At some point, most people want the convenience of a credit card or will need to borrow for a larger purchase, like a car or a house. Your daughter can do a few things today to prepare for when she might need credit in the future. These include ensuring she develops and sticks to a realistic budget, paying all bills and parking tickets on time, regularly depositing to bank and savings accounts, and more. She might also want to consider a low-balance starter credit card too, for example.

Now is the perfect time to set your daughter up for future financial success. By developing good budgeting and spending habits, learning how to track and monitor budgets from an early age, setting savings accounts and goals, and learning the basics of investing, your daughter will be well on the way to building financial acumen and independence. She will also have time to learn from her mistakes, a reality of growing up and living, and to get better at creating and achieving her financial goals. Encourage her to actively learn more, read books, and ask for advice when she needs it. There is no better gift to give your daughter today than financial literacy!

An Investor education and Awareness initiative of Aditya Birla Sun Life Mutual Fund

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