Grandparents can teach kids money management

By Joan Trezek:                Ask Steve Wilcox what one of the most important lessons a young person can learn is.  As the father of three as well as a certified financial planner, chances are good he’ll say: a saving behavior, and money management.  That’s because learning to save money like anything else in life requires discipline and the development of habit. And, the sooner, the better. One of the easiest tools to access in learning to save is the tried and true savings account.  “Just get the money out of sight,” counsels Wilcox.  “Get a fix on something that’s bigger than today— college, a car.  How much should be saved and when to start the savings program depends on the end goal.  Much depends on the age of the young person he explains.  Planning for a seven-year-old is different from planning for a twelve or eighteen-year-old.  Nonetheless, consistently saving, even modest amounts, can yield some impressive results.  Wilcox often cites two examples of that principle.  While not advocating smoking, he points out that if one were to forego the $6/pack-a-day of cigarettes, by the end of the year there would be a nest egg of $2000. Another, even more telling example, is the savings from foregoing the $4 cup of coffee each day (apologies to Starbucks and Peets) from the age of 18 to 65, which assuming an eight percent rate of return, could yield around $750,000. In his work with clients as one of the founders and a principal of Summit Advisors in San Ramon, Wilcox would like to see more of his adult clients involve the children they want to help in the planning process. Grandparents are very suitable mentors in helping young people learn about managing money.  A simple tool that Summit Advisors includes in packets distributed during their workshops is an innovative greeting card concept developed by Pleasanton resident, Barbara Lewis, called TripleGift.  The colorful cards designed for holiday gift-giving as well as birthdays promote the concept of spend, save, and share. Each panel of the card has a slot for a check or bill, allowing the kid to decide how to allocate the funds. “Getting kids to spend is a given, but the beauty of these cards is that they simply and easily encourage saving as well as thinking about others who need a helping hand,” he states.  Cards are easy to order online at As the Christmas and Hanukah holidays approach, it is not uncommon for grandparents (or aunts and uncles) to give considerable sums of money to their favorite young people.  It is also not unlikely that these adults would like to see the money being used for something important and long-term rather than the latest video game.  Equally important, perhaps, is learning to share a portion with a charitable organization: Veteran’s group, a battered woman’s shelter, a children’s hospital foundation. Where do kids learn how to manage money and develop good financial habits?  Elementary schools are not likely to help too much in this area although there may be some attention paid to terms like “principal, interest, rate of return”.  Parents may offer counsel, but often they are too busy or may feel unprepared.  The special relationship between a grandparent and grandchild or other positive adult-child bond presents an opportunity to step in and fill the gap.  According to Wilcox, about half of Summit’s clients request help in planning for the future financial well-being of children in the family, but don’t do as well about involving them in decision-making or monitoring activity. So, assuming the child has saved $1000-2000 with gift money accumulated over a year or two, the next logical question is what to save in. Wilcox offers Mutual Funds as one option—simple balanced funds with a mix of stocks and bonds. “These funds offer an opportunity for kids to learn what they’ve invested in and understand that investment values fluctuate.”  In some instances he may also suggest stocks because direct ownership of a company is appealing and easy to understand. “Kids like the idea of owning a share of Disney or Coca-Cola.  They understand that both these investments are less liquid than the savings account and by their nature are to be left alone to grow.” Wilcox says the essence of his job is understanding investor behavior.  Helping people—adults or children, learn to divorce emotion from their investment decisions is ongoing.  He says that if the reason for investing hasn’t changed, then in most instances one should stay calm despite a dip in value. One of the most gratifying activities for Wilcox and his associates is teaching Junior Achievement at local high schools.  Invited in by teachers, the Summit staff cover the basics of investing, and include discussion of how to manage credit cards, debit cards, electronic bill pay. “The kids seem to really like it; they like being treated as adults.”