How to set your grandkids up financially
It’s only natural for grandparents to want to help their grandchildren. However, spoiling them with a sneaky extra scoop of ice cream when they’re kids is very different to trying to set them up for life financially. So, what are the best strategies for helping your grandkids financially?
Make sure you’re in a position to give
“The first thing you have to do is make sure that you have enough,” says financial expert Vanessa Stoykov, author of The Five Conversations About Money That Will Radically Change Your Life. She argues that people are living longer – and will need their retirement funds to stretch further.
“There’s no point in giving things away if you're going to do it to your own detriment down the track. It’s lovely to be generous, but you've got to put on your own oxygen mask first.”
Teach them to save, not spend
While children (and many adults) are highly skilled when it comes to spending money, they also need to learn how to save it. If you like to give money to your grandchildren for birthdays and at Christmas time, consider other ways you can set them up financially and teach them the power of saving at the same time.
We need to teach kids to be investors, rather than consumers,” argues Vanessa.
She recommends using the free tools and calculators available on the Australian government MoneySmart website, to show grandchildren the power of compound interest and why it pays to start saving your money early.
Another idea is buying shares for your grandkids – it’s the gift that keeps on giving and teaches the benefit of saving at the same time.”
Choose an age-appropriate money message
When it comes to helping grandkids financially, it’s important to use strategies that are age appropriate. Vanessa recommends teaching little kids and younger children the basics of savings. However, when it comes to teenagers, “it's not always about giving money”, she says.
Encouraging grandchildren to get their first job, work towards a savings goal or even just taking an interest in where they’re spending their money can be important encouragement for kids. If you do want to give money to teenage grandchildren, she recommends offering to match a saving goal once it’s met.
Talk about money
Many people struggle when it comes to talking about money with family. If your grandkids are adults and you’re keen to offer financial help, Vanessa believes one of the most important things you can do is start an open dialogue about money.
“Money is a funny thing; you have to keep talking about it,” she says.
“Have conversations, and try and identify what's really important to the people you love – your grandkids or your kids – and how you can help that important thing come true.”
“Perhaps you're part of the solution, but don’t be the total solution,” Vanessa recommends.
Encourage financial independence
If you’re financially stable and have the ability to help your grandkids, a big pitfall can be saying yes to random requests for financial support from your family.
“Don't just try and make things better with money,” says Vanessa. “When you become the bank, people take it for granted.”
“So be strategic. Don't underestimate the power of what you want to give,” she adds.
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