Teaching Your Grandkids About Money
Many grandparents are a great deal of help to their kids and grandkids. They offer childcare, advice, emotional support and financial guidance. However, a frequently overlooked area where you can definitely make a difference is with your grandchildren’s personal financial education. It is essential to have open and educational conversations about money with all the people in your life, including your children and grandchildren. Teaching kids early will build a lifetime of good financial habits.
Some of us were lucky enough to have a grandparent who we considered a great friend. We even talked to them about things we didn’t discuss with our parents. But many of our grandparents were influential in our life in more subtle ways:
Maybe your grandparents lived pretty simply. Then one day, you finally connected the dots to realize that their simple lifestyle helped put you and your siblings through college.
Maybe you had a grandmother who obviously didn’t have a lot of money yet she still enclosed a small check with every Christmas card she sent.
Maybe you noticed how your grandfather set a side a little of his paycheck every month in a savings bond.
One impact that grandparents have is to help their grandchildren learn how to be smart and responsible about money. So how can we help them develop good financial habits? By taking advantage of the fact that they really are already watching and learning from what we do and say.
Talk about money and how you think about it.
Many of us are reluctant to talk about money. Yet openly sharing your financial values and how you handle money is a great way to pass on your good habits.
How do you handle credit cards?
What's your savings plan?
Why do you have investments?
At the appropriate age, bring these topics up with your grandchildren. They do wonder about such things. You are in a great position to turn that curiosity into knowledge.
Take your grandchild to the bank with you.
Think of this as a financial field trip. The kids will learn some of the mechanics of cash banking such as the difference between a checking and a savings account. What does a teller do? How does an ATM work? How about opening a savings account with your grandchildren to help them understand interest and compounding?
Encourage a part-time or summer job.
When they are old enough to work, help your grandchildren look for a job and prepare for an interview. Once they're getting paid, talk to them about withholding and basic income taxes. Help them decide how they want to spend their hard earned cash and where to save some of their earnings.
Introduce investing basics.
Teenagers are already interested in the companies they know about (think Facebook and Google). But it’s also the time to explain why it’s important to diversify their portfolio. Beyond individual stocks, a mutual fund is also an easy way to introduce investing. Make a point to help them monitor their investments. Also talk about the uncertainties with investing and how to think about market volatility.
Introduce the idea of charitable giving.
Good money habits include sharing. Discuss the charities you support with your time and/or money. Ask them which organizations they might like to support, such as a food bank or animal shelter. If they want to help, show them how to contribute a portion of their savings.
The greatest gift of all.
Grandparents are in a very unique position to show love and support in so many ways. It can be something practical like money skills or your philosophy about leading a happy, appreciative and successful life. But most importantly, sharing your values, both in word and by example, can be the greatest gift of all. There is no doubt your gift of time will be remembered for a lifetime.