Part 2 of our discussion of the 7 tips for grandparents to consider as they help their grandchildren grow into financially savvy adults.
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Financially Savvy Grandparenting
A common question we often get, that’s not even really related to investing, is from retirees wanting to know how they can help pass their financial wisdom on to the next generation. So, let’s touch on six tips for grandparents to consider as they help their grandchildren grow into financially savvy adults.
1 – Don’t underestimate the power of the Roth IRA.
- Additional years of tax-free growth can be extremely power.
2 – Understand how to help with college savings.
- Example: 529 plans will count against kids when applying for aid. Think about keeping money in your name instead of your grandkids.
3 – Find creative ways to help kids have an appreciation for saving and investing
4 – Understand that it’s a different world today, from the one you grew up in.
- Not as realistic for someone to work their way through school these days. Higher demands on students and the college costs are way out of whack. Realize the impact of your help with that phase of life.
- At the same time, understand that there are values from your generation (work ethic, etc...) that your grandkids would benefit to learn.
5 – Gift money with purpose
- Don’t just give money to grandkids for the sake of it. Try to earmark it. This $100 is for college. Or this $250 is for your first car.
- As often as you can, earmark the money because that’s going to encourage them to save it for a longer period of time instead of wasting it within a week.
- Don’t be afraid to have the discussion about why you’re earmarking the money. It’s a great learning opportunity.
6 – Don’t downplay the importance of money
- Don’t pretend that money isn’t important. Instill in your grandchildren early on that handling money in a smart and generous way is an important aspect of life.
- Encourage casual conversations about money to help foster this mentality. Don’t make talking about money taboo.
7 – Understand how kids, especially teenagers, might perceive your complaints about the economy and stock market.
- If you’re constantly harping on a message of fear, it could negatively impact a child’s view of investing in the market.
- Be careful of what you say and how you act around the younger generation. They pay attention and not all of your opinions would be beneficial to a teenager’s perspective on investing.
- And kids learn even more by watching what you do, not just what you say. Make sure your actions back up your words and the proper messages will really sink in.