Financial Lessons | Capital Group

Five lessons to teach your grandchildren about money.

Age + experience = a wealth of knowledge. Teach your grandchildren good financial habits now, and you'll help them build a more secure future.

Older woman and young woman sitting together

Key takeaways

  • Sharing your financial wisdom can make a big difference in their lives.
  • Use activities that teach financial basics as a way to connect with your grandchildren.
  • Help them understand that creativity and drive matter, too.

Help them save for an education, but teach them now.

Yes, you can (and you should) give to your grandchild's 529 education savings plan for a college education. But there's another kind of education you can help them with, too. Use your experiences and values to teach them money skills that can empower them for a lifetime.

Stretch that dollar.

Your grandchild probably loves her pocket money or allowance. You can show her how far her money can go when she spends smart. Visit a yard sale or a thrift shop and see how many toys and books she can get for $5 versus a big-box store.

Small-biz fun.

Nurture budding entrepreneurs to help them see that making money takes creativity, work and perseverance. Younger children will love selling lemonade or cookies, while older ones can earn big bucks with a neighborhood dog walking or lawn mowing business. Get creative! If they’re tech heads, they could earn extra cash setting up computers and phones for people who aren’t as savvy. Are they passionate about crafting? Encourage them to set up a holiday boutique to sell their wares. Help them divvy up their earnings, providing guidance to put a small percentage in their 529 savings plan. As time goes by, check the balance together to see how it can grow.

Enjoy real life.

Deep down we know that doing things is more fun than having things. And your favorite memory of your own grandfather probably isn’t something he gave you. Show your grandchild the joy of connecting with people and trying new things. Playing soccer, cooking a meal or having a game night are all experiences that build great relationships and problem-solving skills without costing a fortune.

Save for a rainy day. Or graduation day.

College is way more expensive than it was 20, or even 10 years ago, and you don’t want to watch your grandchildren struggle with debt as they become adults. Get them into the habit of saving while they’re young by helping them open a savings account or buying a U.S. savings bond. Offer a matching grant — for every dollar they save annually, you’ll contribute another 25%. If they have a 529 savings plan started, help them brainstorm ways to add to it by getting an after-school job or staging a play and charging admission.

Delay gratification.

When the internet can ship you a sparkling new gizmo within two hours, it’s hard for people of any age to remember how much more you can enjoy a purchase when you have to plan and wait for it. Is your grandchild in the market for a new bike? Help her save for it by making a budget that outlines how much she has to earn, and how she can do it by not spending as much on games or gear.

Things to do next:

  • Brainstorm a fun 'financial lessons' activity for the next time you see your grandchild.
  • Use our college calculator to illustrate how even a small investment can grow over time.
  • Depending on the state you live in, it may be more beneficial for you to contribute to an existing 529 savings plan for your grandchildren, rather than opening one for them. Talk to your financial advisor about the best way to invest.

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses, summary prospectuses and CollegeAmerica Program Description, which can be obtained from a financial professional and should be read carefully before investing. CollegeAmerica is distributed by American Funds Distributors, Inc. and sold through unaffiliated intermediaries. 

Depending on your state of residence, there may be an in-state plan that provides state tax and other state benefits, such as financial aid, scholarship funds and protection from creditors, not available through CollegeAmerica. Before investing in any state's 529 plan, investors should consult a tax advisor. 

If withdrawals from 529 plans are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. State tax treatment of K-12 withdrawals varies. Please consult your tax advisor for state-specific details.

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This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.