The American Dream – if you work hard you can do well.
We want our children to have better lives than we do. Yet we still leave personal finance education pretty much up to chance. Parents and family are still primarily responsible for instilling the knowledge, skills and values needed to be able to successfully handle money and personal finances.
Yes, some states require one or two high school classes and teach some basic skills. But overall, it is up to the overworked, 2 career parents to ensure the financial acumen of their kids.
If you want to allow your grandchild the American Dream – or better yet, if you want to start or keep a legacy of wealth accumulation in your family, get involved in your grandchild’s personal finance education.
Why grandparents should get involved in financial literacy.
Grandparents get a great excuse to cement their relationship with their grandchild.
Setting aside specific time to help teach financial concepts to grandchildren is a great way to get more time to build the connection between generations (plus it can give the parents some much needed time off from parenting responsibilities).
According to anthropologist Margaret Mead these connections between the generations are “essential for the mental health and stability of a nation.”
Parents don’t have the time.
Children can get undivided time and attention from grandparents that tired, busy parents often can’t give them.
Grandparents have more history.
Grandparents have a broader view of financial history than parents – due to living through it! By teaching their grandchild, grandparents give him or her a better sense of who they are and where they’ve come from. They have roots, a history, and a sense of continuity and perspective.
Grandparents have an opportunity to leave a powerful legacy, to make a difference, to send a message into the future through their grandchildren.
Grandparents also may have had time to make (and hopefully learn from) many more money mistakes than parents. They have also seen more economic cycles and know first had that ‘what goes around, comes around’.
Grandparents can ‘make up for’ not teaching their own kids about finances. They get a second chance to pass along financial knowledge, skills and values to future family members.
Grandparents can be great teachers.
Knowledge, skills and attitudes kids pick up from grandparents stick with them longer than those picked up elsewhere.
Grandparents can be more neutral about money mistakes than parents – and help kids learn from them.
They don’t have to worry about meting out discipline, they have time and space to give the kids the ability to make mistakes early and learn the consequences of good and bad decisions.
The kids feel safe and comfortable and loved – not for what they do but for who they are – making it easier for them to learn.
Grandparents and grandkids can teach each other – making each other feel prized and useful.
Grandparents can help make sure money they bequeath will be well used.
If the grandparent has managed to keep or accumulate wealth, they may well be concerned that future generations will spend it frivolously, not understanding the hard work and sacrifice that went into building it.
Although legal arrangements, such as a trust to the grandchild that stipulates that the child must meet certain financial literacy requirements before receiving the money, can be made – it is much better (and easier on the grandparents mind) if the child is trained by the parents and grandparents while all still live. That way, values and family history are also passed along to the grandchild.
Grandparents can share stories about how the wealth was created and core values such as entrepreneurship, hard work or financial savvy that helped previous generations to succeed. They can and should help the kids learn the values that have been important to the family in managing the wealth from generation to generation.
How grandparents can be involved in helping grandchildren become financially literate.
Use teachable moments.
Tell stories about how you earned money as a youngster. Share with them how much things used to cost while you are shopping together. Show them how to compare prices on an item they want to buy. Just have a discussion or let them try a financial activity while you are going about your day to day business when they are with you.
Make some teachable moments by starting a new tradition – perhaps of sending them a postcard or email or text message or tweet each week about something finance related.
Hold formal briefings.
When you give them a gift of money, share your money values somehow with them – tell them why you are giving them money and what you hope they learn from the gift or use of it.
Have a video call with your grandchild and show them how to research a stock, or calculate the interest they might earn on their savings account or let them educate you on what to look for in an online bank or stock trading account.
Invite them to a money camp.
Invite your grandchild to your house for the week and hold a somewhat formal ‘money camp‘, with activities each day that reinforce and teach financial topics appropriate to their ages.
Go on financial field trips.
Take them to the area federal reserve bank and take the tour. Visit a local business to see how it makes money and creates jobs. Take him/her to work with you and explain your job. Take them to a brick and mortar bank and let the staff explain the bank and the jobs.
Guide their shopping.
Take them shopping – to let them spend their money on what they want. Show them how to compare prices and quality. Talk about the marketing material they see and how it influences them to buy. Let them make some silly purchases when they are young and then revisit that purchase a few weeks or months later to see how they feel about what they bought after time passes.
Share your own everyday financial tasks.
Show them how you pay your bills, balance and track your accounts and explain to them why you do these things. Get them involved in the process somehow. Let them help you write out your grocery list or review your credit card bill.
Encourage school programs.
Help your kids make the schools better for your grandkids. Inspect the curriculum to make sure it includes the appropriate financial concepts at appropriate grade levels. Encourage the administrators and teachers to include personal finance topics in the day to day teaching as well as in extra curricular activities. Programs such as the Classroom Economy project Vanguard put together can help make it easier for them to include these topics.
Finance financial education.
After school and summer programs exist to teach personal finance concepts. In Summer Camp, several price levels of financial literacy camps are explored.
Give financial gifts.
Practice handling money and other financial instruments is very beneficial in developing the expertise to do well with them.
Find ways to let your grandchild earn or make money. Encourage entrepreneurship at an early age to help him or her learn business concepts and the role of risk.
Give them a small stock position in a company that they know about (such as a toy company or a restaurant they frequent) and use that to teach what stocks are, why people invest, why companies issue them and how to research, buy, sell and track their portfolio of stock.
Help them understand what a Certificate of Deposit is, how to buy a treasury bond, what a municipal bond is and why they are used.
Use gifts to teach the language of investing and give practice in it.
Humans learn more and remember longer when they have higher levels of involvement in the process. Playing games provides a simulated real life financial environment. Your grandchild can learn the lingo, the concepts and get practice using them by playing board games and digital games that demonstrate financial concepts.
Try games such as Monopoly, Cash Flow for Kids, Thrive Time for Teens. See my analysis of my favorite board games to teach financial literacy. Also use online games such as Disney/Kauffmann Hot Shot Business and others outlined in our favorite online financial literacy game post.
For even more involvement, especially with the younger grandchildren, set up a pretend business, such as an ice cream shop or a grocery store and play with them, changing who plays which role as you play. Sometimes you may be the cashier, sometimes they will be, sometimes you will be the shopper, sometimes they will. Include play money to practice counting and money value skills. Increase the complexity as they age to include more business concepts such as bookkeeping, marketing and customer service.
Research recommended learning standards.
You need to understand what children at certain ages are capable of learning, so you don’t both become frustrated by trying to teach concepts that are too hard for the age of your grandchild.
You also need to find ways to keep your grandchild actively involved. Don’t lecture, they won’t learn from that.
You are trying to teach financial literacy, but more importantly, you are developing a relationship with your grandchild. Make it fun for both of you or one or both will quickly lose interest.
Get parental agreement and involvement.
Make sure the parent’s are aware of what you are planning to do and why. Let them guide you in what to teach their child. Make sure that the values you intend to teach are in line with those both parents want their child to learn. Let the parents help you figure out what the kids already know and what they should learn next.
Reinforce throughout the years.
Be consistent in the things you teach and the values you are trying to impart. Repetition is still an effective way to learn. If your grandchildren hear the same message year in and year out, they will remember it and probably integrate it into their being.
Let your grandchildren learn about consequences of bad money decisions, early on.
If your young grandchild learns early that spending money on a cheap toy now results in no money and a broken toy later, they can learn the value of delayed gratification (with a few words from you to help them realize what is going on).
If your teen grandchild has a checking account and overdraws it, don’t bail them out. Let them experience the pain of extra fees at this young age. You can help by making sure they balance their check book and note the overdraft and fees and discuss alternatives with them.
Let your 8 -12 year old grandchild practice having their own business, learning that not everyone will buy their product and that sometimes they may make a profit but other times they won’t.
Show your pre-teen grandchild that the credit card purchase isn’t free money – share your bill and point out any interest you paid over and above the purchase amount.
How are you involved in making sure your grandchildren are financially literate? Do your parents help you with your child’s personal finance education? What cautions can you add?