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How Grandparents can teach lessons about money and investing

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Grandparents can have a special hand in helping their grandchildren save for the future. PHOTO BY NIKOLINE ARNS VIA UNSPLASH


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Enjoying the ride of being a grandparent is mainly about fun and games (and candy, of course). But grandparents can be in a unique position to help teach children about money, saving, and investing. The lessons they learn while they’re young may become so engrained they will help guide them well into their adult lives.

Begin with the three “buckets”

The next time you slip your grandkids some money (you know you do), consider employing this classic method for teaching the value of money and saving, especially if they’re very young.

The idea is simply to have them divide the money into three “buckets” — whether they’re literal or figurative is up to you:

  1. Spending. The first bucket is for them to spend right away on whatever they want, like a toy or a special treat (with their parents’ permission, of course).
  2. Saving. The second is for saving for something bigger, and more expensive, they’d like to have down the road. This can teach them about delaying gratification and setting a savings goal. If you’re looking for a good excuse to set up a custodial savings account for them at a bank, this could fit the bill. 
  3. Giving. Finally, have them use part of the money to help them learn about giving back and supporting a cause they really believe in. Since young children often love animals, the local humane society may be a good place to start.

Introduce investing

When you think they’re ready, introduce them to the potential rewards, and risks, of investing. Help them understand the difference between owning a stock — taking an ownership position in a company that may pay a dividend — and a bond — lending money to a company or government entity in return for interest payments.

Discuss the value of not putting all their eggs in one basket or, in other words, diversification. Explain that a portfolio that’s mainly stocks may have a greater return potential than one that’s primarily bonds but is also likely to experience greater volatility from market activity.

You could also encourage them to begin setting long-term investment goals. Although being able to afford retirement is motivating for adults, it may not resonate with them at this point. However, higher education, a new car, or a fun trip just might work.

Making it real

Since they’ve already learned something about banking through that savings account you (hopefully) helped them open, as they get older, it could be a good time to help make investing real by assisting them with starting an online investment account and providing some start-up funds. Keep in mind you can give up to $17,000 ($34,000 for a couple) in 2023 to an individual without incurring gift tax implications.

After they’ve seen firsthand how investing works, explain that as they get older, potentially accumulate assets, and have a more complicated financial situation, they should consider working with a professional financial advisor to help them work toward their long-term goals and insure they can Enjoy the Ride of life!

Diversification cannot eliminate the risk of fluctuating prices and uncertain returns. Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Shore to Summit Wealth Management is a separate entity from WFAFN. Shore to Summit Wealth Management is located at 105 E. Oak Street, Unit 1A Bozeman, MT 59715 #406-219-2900. Wells Fargo advisors financial network is not a legal or tax advisor. Please consult with a tax advisor before taking action.

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