Is This My Real Life?

My husband and I established a tradition of giving our grandchildren a monetary gift on their birthdays and Christmas. Of course, we still give them a tangible gift too, and this is just the beginning of an important lesson they will learn.
Is it real?
On our grandson’s sixth birthday, he unrolled his “scroll” that Papa had carefully rolled up and tied with a ribbon. This paper listed all of the monetary transactions from Connor’s birth up until that point, including the current gift.  My husband invests the money in a way that puts it somewhat at risk, but is a long-term investment strategy (unbeknownst to the grandchildren!).
Papa always updates his document with any interest or impact of the stock market on any investments, so Connor has a tangible representation of his financial gifts.
His eyes lit up as Connor asked his Papa how much was added to his account and how much it had grown since last time. Once he received his answer, he smiled and walked towards his room – scroll in hand.
As he headed up the stairs, Connor quietly commented, “I just wish I had this money in my real life.”
As adults, we often wish we had our retirement income, investments, or other money today rather than in the future. Seeing it on paper is just not good enough sometimes and it feels like the money is not real.
Imagine how difficult it is for children to understand the importance of saving and investing!
Start with a plan
One way to teach children about the value of money is to start a tradition for children as soon as they are born, or at any point in their young lives. Of course, it’s fun to buy clothes, toys and lots of nice things for the grandchildren. But imagine how much more important it is to help prepare them for the future. By stashing away a small amount of cash when they are young and adding to it throughout the years to come, grandparents can play a vital role in teaching children the power of saving.
As Connor now recognizes, his money is growing and he is beginning to understand that the longer he leaves it alone, the more money he has. But children want instant gratification and now is the perfect time to help him learn to manage his money and have immediate satisfaction too.
That’s why it’s important to devise a plan to help children feel like they have some money in their “real life”.
A plan that works
One way to teach children the power of money and saving is to help them establish financial goals. They should have three types of goals:

1. Short term (instant gratification)
2. Medium term (near future)
3. Long term (future)

For example, ask a child what he wants right now, soon, and later. For Connor, his answers are likely to be Matchbox cars, a new Wii game, and a car.
Those are his three goals!
But don’t forget the importance of giving to others too.
Add a fourth category for your grandchild which includes a “giving gift” — which might be a percentage of money donated to a church, charitable organization, food bank or other type of important activity.
Now, you can help a child understand that with his money, he can make all of this happen.
Let’s assume he receives a $20 birthday gift. He can spend $5 for Matchbox cars, save $9 towards a Wii game purchase, save $4 for a future car, and give $2 to a charitable organization. He now sees the significance of allocating his money to get what he wants – which is reaching his goals while helping others.
And he has instant gratification too!
Teach life-long lessons
Like Connor, children want to see their money in their “real life” so help them make it happen. Prepare four separate envelopes with each goal written on the front. Each time the child receives a financial gift, help him allocate the money according to the plan. The child can watch the money grow and see how money management really works, while still spending some of it.
These are life-long lessons that help prepare children for adulthood and make them more responsible.
Upcoming articles
Over the next four weeks, we’ll talk more about how grandparents (and yes, parents!) can help children learn about the value of money and what it can do for them. Teaching children about earning, saving, investing, and spending money wisely is an important part of their education. Grandparents are uniquely positioned to positively influence this part of a child’s life by modeling behaviors that emphasize the importance of planning and managing what we have through thoughtful giving.
Next week, we’ll talk more about helping children learn to share and help others. It’s not just money that can make a difference, and what better time than the holidays to instill a sense of giving into a grandchild by setting a positive example?
And who better than a grandparent to influence a child to be more responsible and charitable?

About the author:  Rhonda Day spent more than 25 years in the corporate world of business with various healthcare organizations and leadership positions. She is currently a freelance writer and editor. She has three grandchildren and is happily married to Andy, who is a Certified Public Accountant and Personal Financial Planner. She can be reached at [email protected].