It's Your Money  

Give gift of financial literacy

Many grandparents I know have discovered the value of providing a financial gift such as an RESP contribution to their grandchildren instead of another toy that they will likely lose or forget about in short order.

There is another type of gift however that grandparents are in the unique position to pass on to their grandkids, but many don’t know how to do it or where to start.

The gift of financial literacy is likely the most valuable thing you can ever pass on to your grandkids and until we create the necessary framework to build this into our core education programs, it’s something they desperately need. 

But why do I suggest putting this task on the shoulders of a child’s grandparent and not their parents?

Most of the time, grandparents have an edge over parents in their ability to talk more freely with their grandchildren.

While children will sometimes resist listening to financial advice from their parents, they may be more willing to hear grandma or grandpa out.

Some parents fear that the grandparents might meddle too much or make their lives more difficult, so the parent’s prior support and blessing is important here. 

While this all sounds wonderful, how should it be initiated?

It all starts with a conversation; and it’s very important not to be too pushy here. Children want to learn, but they also want to know how it will apply to their lives. 

Grandparents could consider telling some stories of how they bought their first house and how they paid for it. Or they could explain their retirement income streams and how they pay for expenses without working anymore. 

The next step will be to get the grandchildren involved themselves. With the parents’ permission, of course, you could consider giving a grandchild a cash gift for their birthday or Christmas.

Give the grandchild three jars and label them:

  • spend
  • save
  • donate 

They can allocate one-third of the cash gift to each of the three jars. The “spend” jar can be used at any time to buy items they want.

The “save” jar is money that should be put away or invested for the long term.

Finally, the “donate” jar is money that should be set aside to donate to charitable causes. 

Over time, the grandparent could then have discussions with their grandchild on how to use the money in each jar. They could take their grandchild to meet their own investment adviser once their “save” jar has built up a little.

A field trip like this with grandma or grandpa can be a very memorable occasion and also a great learning opportunity.

With the help of the grandparent, the grandchild could also set up their own investment account with the advisor or online and choose their own investments. 

The “donate” jar provides another great lesson in the making. The grandparent(s) could set up a special time for them and the grandchild to meet and talk about different charitable causes.

They can discuss the pros and cons of each option and select one that the child believes in. 

If a certain dollar amount is required for the type of gift the grandchild wants to make, they may even want to do a little fundraising in the family or with odd jobs to reach their donation goal. 

Opportunities for learning are everywhere and ones that may seem minor to you could be a great addition to a grandchild’s financial literacy.

Consider taking them along to the ATM machine and having a discussion on where that money comes from and how it got there. Take them out for lunch afterwards and discuss the bill and why you’re leaving a tip for the server. 

Parents can definitely apply many of these same strategies and help teach their children about financial matters but don’t forget that grandparents can also assist in this role.

This may create a great way to share some special time and leave a lasting impression that will benefit them for the rest of their lives.   


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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and will take over as board chairman in June. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations for the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected].

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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