Grandparents, Grandchildren And Money

The bond between grandparents and their grandchildren can be a powerful one. For grandparents, it is a gift of a new connection between all who have preceded them and all who proceed from them, writes Arthur Kornhaber and Kenneth Woodward of Grandparents Grandchildren: The Vital Connection.

In most cases, the multigenerational relationship is an easier one than with the generation that is raising their children. Grandparents are thought of as more fun than parents with fewer rules. Grandparents and grandchildren are naturally at ease with each other while both have intense emotional relationships with the middle generation, the parents. In many cases, Grandparents have more free time, patience and financial freedom than their still working children who are currently raising children. Due to this, grandparents are distinctively situated to convey many important messages to their grandchildren around a wide variety of topics but in particular: money, which can be an emotional topic, is a great topic for grandparents to discuss with their grandchildren.

Many children learn the benefits of being involved in philanthropy and volunteerism through their grandparents. As a grandparent, remember you can model and teach the values you believe in the most. Are you active in an organization? Depending on the age of your grandchildren, perhaps there are events you can involve them in whether it’s a family volunteer day or an awards ceremony honoring community leaders. Keep in mind the lesson will be all the more powerful if it incorporates some of the child’s interests. For instance, if they like animals, find an animal shelter that can use some extra hands. If they are learning about the environment in school, help clean up a park together.

Grandparents can help children of all ages acquire the skills and tools they need to become financially literate. An article in The New York Times on the subject gave several age-appropriate suggestions.

With their parents’ consent, one grandfather started giving his grandchildren money savvy pigs, to show children four uses of money: save, spend, donate and invest. He asked them to divide their allowances into the four categories, and they would talk about those decisions at their regular breakfasts.

Another grandparent said field trips worked for grandchildren of all ages, even if they were to visit a financial adviser or an accountant. To make the trip special, she said, grandparents could suggest skipping school for a day or taking a train trip into the city. The central point, though, is to explain that everyone needs a financial team, she said.

The same grandmother also encouraged grandparents to create a financial memory bank with their grandchildren. Where did they struggle or fail? What did their first car or house cost? Why did they decide to go back to school while working with a young family? I’ve seen it be life-changing for the family dynamics, she said in the article.

With grandchildren who have summer jobs, grandparents could propose some sort of match for the dollars earned, perhaps by putting an equal amount into a Roth I.R.A. for the grandchild or contributing to a savings account.

Many grandparents are also in a position to be able to gift their grandchildren. But, what’s the best way to invest in their future while teaching life lessons regarding money?

Whether you choose outright cash gifts, gifts from your existing portfolio or gifts of future interest in a trust, college savings plan or insurance, be sure to discuss these with your grandchildren to give them insight into your thinking.

Remember, especially if giving money for immediate use, it is usually best to discuss your plan with the parents first. Talk to them about their allowance system and rules for their children in regards to earning and spending money and try to find ways to reinforce the lessons being taught at home.

Putting grandchildren to work can be better than just handing out cash and is often in line with the parents’ own rules. For instance, you can hire your grandchildren to do or help with chores and yard work.

If you’re giving grandchildren stocks or bonds now, show them how to keep track of them.

For cash you gift or pay, your support can continue to influence how your grandchildren use money. For example, for every dollar a grandchild saves (or donates or invests) from the money given you could match their investment totally or partially.

By making financial lessons an enjoyable, intergenerational and interactive experience, grandparents are in a unique position to instill values and have a lasting impact on a grandchild’s attitude towards money as well as his or her spending and savings habits.

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