“When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much he had learned in seven years.” – Mark Twain

While it’s true that the wisdom of elders is often underappreciated until one has endured a few rites of passage, grandparents have a unique authority for imparting useful financial knowledge. In many cases, they can discuss money basics more easily because they don’t have a discipline-focused relationship with their grandchildren, like the parents do.

Children can quickly size up the difference between their daily routine with Mom and Dad versus the rules (or lack thereof) at Grandma and Grandpa’s house. When kids spend time with grandparents, they can focus on activities like storytelling and fun games. Because grandparents have a lifetime of experience, they presumably have ample wisdom to impart. What’s more, grandchildren may be more willing to listen to it than if it were coming from their parents.

Here are a few basic financial lessons that grandparents can share with their grandchildren:

1.Develop a saving habit

Many baby boomers can recall their parents and grandparents talking about the Great Depression and how important it was to control expenses and save for a rainy day. Boomers have experienced financial ups and downs in their own lifetime, too, including the Great Recession of 2007–2009 and recent uncertainty caused by the COVID-19 pandemic. What can you share with your grandchildren about a time when cost cutting made a positive difference in your life? Do they need to hear advice such as “Pay yourself first?” After all, the greatest gift of youth is time, and instilling a saving habit early can help set them up for decades of compounded potential financial growth.

2.Practice philanthropy

These may seem like big words for little ears, but significant financial resources should be accompanied by a sense of helping those who are less fortunate. Tell your grandchildren stories, either firsthand or experienced by others, to help them learn that money can be a tool for making another person’s life better. Children can absorb the concept of empathy at a young age, which is how their sense of philanthropy can take hold. When they share a favorite stuffed toy with a sibling who’s sad or ill, they’re demonstrating a basic desire to help someone else. Once they’re older, you might participate with them in a food drive or help them contribute some of their savings to a cause that’s close to their heart, such as animal rescue or disaster relief.  By discussing and modeling the ideal of sharing with others, you’ll teach them about the glue that holds society together.

3.Delay gratification

At age three, a child can begin to learn the value of patience and preparation as an alternative to the must-have-it-now mentality that can lead to bad financial habits later. According to the American Psychological Association, the ability to delay an immediate reward in favor of a superior, deferred benefit is linked to greater academic success, effective coping skills, healthier weight, and better relationships with peers. Help your grandchildren learn patience by using “self-distracting” techniques such as counting backward, changing focus, exercising, or drawing pictures. Coupling a lesson in delayed gratification with a lesson in saving habits is another way of promoting financial independence later in life. For example, instead of buying your grandchild the toy of the moment, keep a Fun Day jar in your house where they can save money you give them for doing chores, helping with tasks, and other small jobs. This can help teach them the art of patience and connect their reward to the practice of saving for whatever they want instead of having it instantly provided by you.

4.Handle debt with extreme care

You’ll do the younger generation a great service by talking about the pitfalls of having too much debt. This is a lesson that many people learn the hard way, long after being a kid. Beginning at age 14 or so, and building on lessons about delayed gratification, share with your grandchildren any mistakes you’ve made in using credit cards, bank accounts, credit scores, and other basic financial tools.

5.Invest like a grown-up

Children as young as 10 can understand and even get excited about owning stock, especially if it’s a company they’re familiar with, such as Disney, Nintendo, or Nike. They’ll likely be fascinated with the idea of “owning” some of their favorite brand, and be motivated to learn more about profit and loss, financial markets, dividends, and other aspects of stock ownership as well as index funds. Some online apps are tailored specifically to children’s investment learning.

At Mercer Advisors, we help grandparents, parents, and other family members develop financial foundations for future generations, including strategies for communicating essential financial values. Contact us to learn more. If you’re an existing client and would like additional information about how to build generational wealth, reach out to your wealth advisor.