Grandparents: Give the Gift of Financial Literacy
I’ve previously written about some of the financial gifts that grandparents can consider giving to their grandchildren including setting up Registered Education Savings Plans (RESPs) or life insurance policies that will continue to grow throughout their lives. There is another type of gift however that grandparents are in the unique position to pass on to their grandkids but many don’t know how or when to present it. This year, take the time to pass on the gift of financial awareness.
Most grandparents have an edge over parents in their ability to talk more freely with their grandchildren. While children will sometimes resist listening to some financial advice from their parents, they may be more apt to hear grandma or grandpa out. Some parents fear that the grandparents might meddle too much or make their lives more difficult somehow so the parent’s support and blessing is important here.
While this all sounds wonderful, how should it actually be done? It all starts with a conversation; and it’s very important not to be too pushy here. Children want to learn but they also want to know how it will apply to their lives. Grandparents could consider telling some stories of how they bought their first house and how they paid for it. Or they could explain their retirement and how they pay for expenses without working anymore.
The next step will be to get the grandchildren involved themselves. With the parents’ permission of course, you could consider giving a grandchild a cash gift for their birthday or Christmas instead of another toy they don’t really need. Give the grandchild three jars and label them spend, save and donate. They can allocate 1/3 of the cash gift to each of the three jars. The “spend” jar can be used at any time to buy items they want. The “save” jar is money that should be put away or invested for the long term. Finally, the “donate” jar is money that should be set aside to donate to charitable causes.
Over time, the grandparent could then have discussions with their grandchild on how to use the money in each jar. They could take their grandchild to meet their own investment advisor once their “save” jar has built up a little. A field trip like this with grandpa can be a very memorable occasion and also a great learning opportunity. The grandchild can set up their own investment account and choose investments that they like.
The “donate” jar provides another great lesson in the making. Grandma could set up a special time for her and the grandchild to meet and talk about different charitable causes. They can discuss the pros and cons of each option and select one that the child believes in. If a certain dollar amount is required for the type of gift they grandchild wants to make, they may even want to do a little fundraising in the family to reach their donation goal.
Opportunities for learning are everywhere and ones that may seem minor to you could be a great addition to a grandchild’s financial literacy. Consider taking them along to the ATM machine and having a discussion on where that money comes from and how it got there. Take them out for lunch afterwards and discuss the bill and why you’re leaving a tip for the server. Parents can definitely apply many of these same strategies and help teach their children about financial matters but don’t forget that grandparents can also assist in this role. This may create a great way to share some special time and leave a lasting impression that will benefit them for the rest of their lives.