No matter how close or far the apple falls from the tree, good money habits are taught more often than inherited. Just look at the statistics on inherited wealth: approximately 70% of generational wealth is lost by the second generation, and 90% by the third generation. Leaving a legacy of financial literacy may be one of the most valuable things you can pass on to your grandchildren, but it requires intention. Let’s look at a few ways you can empower the next generation by teaching them how to make and maintain healthy financial habits.
Engage and Involve Them
In a world that’s increasingly digitized and subsequently detached, often one of the most meaningful ways to connect with kids is through quality time. Whether you’re on babysitting duty or just spending one-on-one time with a grandchild during a family gathering, try letting them get a glimpse “behind the curtain.”
Have you ever noticed how, if given the chance, young kids would much rather play with real, everyday items than toy versions? Harness that curiosity in age-appropriate ways and try involving them in your everyday interactions with money. Ask them to help you count and roll coins while you talk about the value of a penny, nickel, etc. Take them along with you to the bank and show them how a deposit slip works, or let them come along to the grocery store and hand the money or card to the cashier. This can also be a good way to introduce the concept of sales tax, and what taxes pay for; as you go about your day, point out various city infrastructures and services that those taxes pay for.
Teens and preteens can be harder to connect with, but finding ways to connect financial literacy to things they’re already interested in is a great starting point. Think investing is too boring for young minds? Try inviting them to join you in following stocks that tie into their interests–think Apple, Nike, or Starbucks. Show them how those stocks have risen and fallen in value over the past months and years. You can also talk to them about how their favorite celebrities or star athletes have managed (or mismanaged) their wealth through investments, entrepreneurial endeavors, etc. It’s a good way to teach them that you can lose money as quickly as you earn it if you don’t manage it wisely.
Create Real-World Opportunities
Everyone has their own learning style and pace, but those who learn best by kinesthetic learning make up 87.6% of the population. These individuals absorb information best through a hands-on approach, as opposed to visual or auditory input, which is why giving your grandchildren real-life opportunities to practice good money habits can help those lessons stick.
For younger children, this can be as simple as helping them manage an allowance. Take them shopping for a parent or sibling’s birthday, out to lunch, or to the store to get something for themselves, but let them manage a set amount of cash. As they decide what to buy, it’s a good opportunity to talk about needs vs. wants and pressing pause before you purchase.
When teens and pre-teens start handling their first paychecks, it’s a great time to discuss income management. If they don’t have a savings or checking account yet, consider helping them set one up–just make sure not to overstep, and talk to Mom and Dad first. Ask about their financial goals. Are they saving up for any big purchases, like a car or a phone? Help them determine how much that purchase will cost in the future, and then break it down into monthly savings goals. Consider offering to match what they save. If you do, that’s a great way to show them how employer 401(k) matching works.
Lead by Example
One of the most important ways to teach financial literacy to your grandkids is to practice what you preach. Kids are sponges and will benefit even more from your example, especially if you share openly with them. Don’t be afraid to share the financial mistakes you made when you were younger, how you overcame them, and how you avoid making those mistakes now.
Creating good money habits takes time, but the earlier you help your grandchildren start, the more time they’ll have to develop healthy saving and spending habits. There’s nothing more beneficial than setting them up for a lifetime of wise financial decisions.
