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Grandparents adopt 'money mentor' role

They step in to help parents short on time – and young kids who need help with an often-ignored discipline.

By Caralee AdamsSpecial to The Christian Science Monitor / March 25, 2002

When Peggy Houser heard that her grandchildren weren't being given their small weekly allowances, she offered to take over the task for her daughter, who had simply been forgetting to dole it out.

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But she didn't stop there.

Mrs. Houser wanted to be more than a dollar dispenser. She insisted that the grandchildren – beginning in first grade – sign an agreement to save a percentage, and that they also draft a spending plan together.

"People don't realize that children are ready for this at an early age," says Houser, of Denver, adding that her daughter was happy to have the help.

Soon, Houser's grandchildren got in the habit of socking away 10 percent of their allowance at the bank. They enjoyed having their own money to spend, and became eager to earn extra money doing chores as they worked toward their spending goals.

Some child-development experts recommend that adults introduce kids to the concept that people have to pay for what they want as young as age 2. As children grow older, they can then be introduced to banking, budgets, and investing.

Personal finance seldom ends up on a child's school curriculum. It's not something they can pick up from friends. Teaching youngsters to be savvy shoppers, good budgeters, and disciplined savers takes time and know-how – both of which today's parents often lack.

Grandparents can often help. In many cases they have the time and the track record to be sound financial mentors. Unlike their children, who may be struggling with debt or lax with budgets, many members of this generation know how to pinch a penny and save.

"Grandparents have learned the hard way about money management," says Houser, a certified financial planner and co-author of "How to Teach Children About Money."

Surveys show that parents tend to be overconfident about their money-management prowess. Some 97 percent of parents said they understood financial matters "very well" or "fairly well," according to a recent poll by the Washington-based American Savings Education Council. Yet, 55 percent said they carried credit-card debt from month to month. Less than half said they make a budget and stick to it.

A look at some case studies in grandparent economics:

Taking a harder line

For Sam and Gloria Faucett's grandchildren, a trip to Wal-Mart or Toys-R-Us is a treat. It's also a lesson.

"We set a dollar limit to spend," says Mr. Faucett of Marble Falls, Texas. "We've taught them to check the price."

The children look at newspaper ads before they shop, Faucett says, and take pride in finding bargains.

The Faucetts' daughter, Gretchen Fitzpatrick, says her parents aren't rushed when they visit her in Pensacola, Fla., and take her three kids – ages 5, 7, and 9 – shopping. "I wouldn't have the same patience," she says. If they are given $5 to spend and something is $5.05, Mrs. Fitzpatrick says she usually throws in the extra nickel.

With their grandfather, however, "they have to stick to it." Grandpa feels he can be an absolutist. "We can go in and be firm and then leave town," he says.

Fitzpatrick says her father also has more time to be creative. For instance, before the family went to Walt Disney World a few years ago, Faucett designed a trivia contest to give the grandchildren a chance to win spending money. For each question they answered correctly they earned $1. Each child racked up about $20.

The Faucetts also work with another set of grandchildren in Collierville, Tenn., urging them to set goals and save for them. Eleven-year-old Drake has already identified the (real) pick-up truck of his dreams. Eight-year-old Bryan is socking away money for a Ford Mustang, says Greta Smith, the boys' mother.