Teaching Spending Strategies to Your Grandchildren

Piggy Bank On Pennies

Looking forward, do you worry about the financial security of your loved ones, especially your young grandchildren? Spending and saving savvy are best taught young and grandparents can make a strong impression with these matters. But you have to commit to more than just a birthday check once a year.

In today’s blog, we would like to share a few topics that will help youngsters gain a love for saving and being smart with their money. We hope you will share them as a parental tool for your own children to use or maybe implement them with your own grandchildren directly.

Whatever saving and spending habits you inculcate into your grandchildren are likely to stick with them their whole lives. Think of it this way: The more financially adept you can make them, the more you can spend out of their inheritance without feeling guilty!

However, there are effective and ineffective ways to control the flow of money into the hands of those who are less experienced with these matters.

Teach kids about fiscal responsibility. Sure, they’ll learn from their spending mistakes as they go, but not nearly as quickly as if you prepare them by sharing what you have learned.

We encourage you to give your grandchild a jar for saving and a jar for spending. (Some add a jar for “sharing,” whether it’s to buy gifts or to donate to charity.) You can either decide together in advance what percentage will go into each, or you can let them decide each time he or she receives funds.

Make it clear that if a child’s spending money disappears, he or she will have fewer choices than their siblings when further spending opportunities come along, and you and their parents won’t be making up the shortfall. Children have a high sensitivity to perceived unfairness — which means it’s essential to lay out the logical consequences of their actions. A child who believes he or she lives in an unfair world is less likely to make responsible decisions because it can lead to lost hope that those decisions matter in the long run.

Create a system and lay out clear rules. One option is to make a list of perks that kids can spend their money on, and show them how to apportion their funds throughout the month, or save for larger expenditures. Whether the list is large or small, it should be populated with items that must be purchased by your grandkids if they want them. Warn them that the perks won’t suddenly become funded by Grandma or Grandpa when the money runs out; they will instead go away until funds are replenished. Don’t bend, or you’ll teach them that spending all his or her money comes with bonuses rather than drawbacks. Especially don’t make exceptions for one “bankrupt” child when others have spent their money judiciously.

Make it meaningful. Talk to your grandkids about how you spend your own money, so they understand why you or their parents can’t buy them everything they want. Show them how to comparison shop so that they understand what it means to save money today to maximize future opportunities. And make sure to have fun with it. Ensure that your grandchildren know that the point of saving is to maximize the return — and the enjoyment — that comes from your investments.

Safeguard Investment Advisory Group