The Gift of Financial Literacy for Grandchildren
Many grandparents I know have discovered the value of providing a financial gift such as an RESP contribution to their grandchildren instead of another toy that they will likely lose or forget about in short order.
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 to do it or where to start. The gift of financial literacy is likely the most valuable thing you can ever pass on to your grandkids and until we create the necessary framework to build this into our core education programs, it’s something they desperately need.
But why do I suggest putting this task on the shoulders of a child’s grandparent and not their parents? Most of the time, 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 prior support and blessing is important here.
While this all sounds wonderful, how should it be initiated? 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 income streams 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. 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 grandma or grandpa can be a very memorable occasion and also a great learning opportunity.
With the help of the grandparent, the grandchild could also set up their own investment account with the advisor or online and choose their own investments.
The “donate” jar provides another great lesson in the making. The grandparent(s) could set up a special time for them 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 or with odd jobs 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.