Grand Advice: Helping Your Grandchildren Set Their Best Savings Goals

The Power of Intergenerational Financial Coaching

September 2012

On the surface, a grandparent jumping in to teach a young adult grandchild about setting the best savings goals may seem a little off-base. After all, isn't that what the kids' parents should have done?

Maybe so. But kids can always use some reinforcement and often miss the message altogether, either because money can be such a touchy subject in some families, or because the importance of getting into the best savings habits early just never came up. Seriously: Some parents are more comfortable talking to kids about the birds and the bees than IRAs and CDs.

And in fact, to say young people are ill prepared to handle their finances is a bit of an understatement.

"It's abysmal how few financial capabilities younger people have," said Priscilla Stanton Wolfe, Ph.D., director of education at Networks Financial Institute at Indiana State University. Dr. Wolfe spoke to Ally Bank in a recent interview.

Supporting Wolfe's contention: A recent survey from The National Foundation for Credit Counseling found that only 59 percent of Gen Y'ers pays their bills on time, for example, and a report from Charles Schwab disclosed that only 34 percent of parents teach teens how to balance a checkbook.

Grandparents can help, Wolfe said, especially by talking about goals, modeling their own experiences, and laying out the best savings strategies. "When people don't have a reason or purpose to save, it's very hard to get motivated," she said.

"Grandparents can talk with kids as they're starting out... Even as something as straightforward as sorting out the difference between short-term goals and long-term goals can be very helpful. It's important that they begin to ask themselves, 'What are my priorities and how can I make them real?'"

"Grandparents can be really influential," added Lynne Finch, author of The No-Cash Allowance, who recently spoke to Ally Bank.

"For one thing, money may be more of a neutral topic between grandparents and grandchildren, not something they've argued about. For another, saving has a different connotation for older people than it does for younger generations: A grandparent who is willing to talk openly about his or her own experience can show how saving has helped them. They can explain how their money grew over time in a way that's really meaningful."

Besides, who has more credibility on the subject of retiring well than a happy grandparent? Who has greater authority for showing how the best savings habits can pay off in the long run? "It can be so useful for a grandparent to help a young adult set up an IRA or 401K, for instance," Finch said.

Young adults should be learning to be comfortable with figuring out a spending plan, managing their debt, and figuring out their best savings goals - from short-term (a new car next year), mid-term (a house in five years) to long-term (including retirement).

Grandparents can also find basic financial literacy tools to discuss the best savings strategies at MyMoney.gov.

Ally Bank is Here to Help, too.

At Ally Bank, our accounts help families make their best savings strategies possible. No matter which way you decide to save, our rates are consistently among the most competitive in the country according to rates as published by Bankrate.com. Visit Allybank.com or call live 24/7 customer care at 877-247-ALLY (2559) for more information or to open an account today.

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