As parents and grandparents, we are always looking for ways to help improve the lives of our families. For many of us, the importance of financial security for our children and grandchildren comes third only to their health and their happiness. While gifting cash to aid in their financial security is one possible solution, it comes with a whole host of risks. These include lack of financial education, potential for mismanagement, and a feeling of entitlement. Fortunately, there are myriad other ways to help the younger generations in your family get a leg up while learning about money, experiencing the pride of working for what they have, and achieving their own goals.
Here are several ways you can support your younger family members’ financial well-being and education:
Education Accounts:
Contribute to a 529 College Savings Plan or other educational accounts. These funds can grow tax-free and be used for educational expenses, providing them with a financial head start for higher education. If you are planning to contribute a large amount, consider “superfunding” their account for tax benefits.
Financial Literacy:
Invest in their financial education. This can include enrolling them in financial literacy courses, providing books on money management, using online resources and apps designed to teach kids about money, or gifting financial planning services when they are old enough.
Matching Contributions:
Set up a matching program where you match any amount they save or invest. This can incentivize them to save, teach them about the benefits of growing their money, and help them understand the benefits of an employer match and compounding.
Teach Financial Skills:
Spend time with them discussing budgeting, saving, and investing. Use real-life examples sharing your experiences and involve them in managing small amounts of money to build their financial skills.
Entrepreneurial Opportunities:
Encourage and support their entrepreneurial ventures. Whether it’s a lemonade stand, a small online business, or a creative project; hands-on experience can teach valuable lessons about money management and business.
Encourage Saving for Goals:
Help them set and achieve financial goals, whether it’s saving for a special item or a future experience. This teaches them the value of planning and delayed gratification. This could include contributing to their goals in place of other gifts or helping them set 20% of any money they make working or doing chores aside.
Role Modeling:
Demonstrate good financial habits through your own actions. Children often learn by example, so showing them responsible financial behavior can be a powerful lesson.
Volunteer Work:
Involve them in community service or volunteer activities. This can teach them about the importance of giving back and managing resources wisely.
By combining financial education with practical experiences and thoughtful planning, you can provide your grandchildren with a strong foundation for financial success. If you have any questions Regarding additional strategies you can use to support the younger members of your family, please reach out to your advisor.
Written: July 30, 2024