THE BLOG
08/01/2013 12:37 pm ET Updated Oct 01, 2013

How Will Your Grandkids Treat Their Inheritance?

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Congratulations Baby Boomers, your generation began reaching 65 in 2011, with 6,000 following each day. You're reaching that wonderful time when you can retire, do all the things you put off and spend precious time with your grandkids -- the Golden Years.

While that may be true for some, it certainly isn't so picture-perfect for others. By age 65, a mere 1 percent will be considered wealthy, 4 percent will have adequate capital and 63 percent will be dependent on Social Security, family or charity. Nearly half of 65-year-old Boomers are retired with 14 percent of the retirees holding part-time jobs.

Whether you're living the retirement of your dreams or you are still working and hoping to hold on to the home you love, you're probably thinking about whatever estate you will leave behind. In an ideal world, your kids should be grown and self-sufficient so you are focusing on those wonderful grandkids. You and your lawyer, and perhaps your financial planner, have carefully thought out your last wishes and put them into a will. [As a side note, make sure your will is kept up-to-date.]

Have you thought about what your grandkids will do with any inheritance they are lucky enough to receive from you? I'm sure that some of you have lost sleep over this. Will they know how to handle money? Maybe they will just go on spending sprees or throw lavish parties for their friends? Are they spenders or savers? You've been driving that 1982 clunker all these years -- will they go out spend all their money on an expensive sports car that will depreciate by 50 percent in three years?

I know that some of you are thinking that once the grandkids inherit, the money is for them to use however they please. Some of you would probably want them to buy that expensive car that you denied yourself. We all want our kids and grandkids to have the things we didn't. But, what if your heirs actually wanted to do what was in their long-term best interest?

Our grandkids could grow up to be money-savvy. But, since only 16 states require students to be tested on economics, and only four states require high school graduates to complete a one semester course in personal finance, the responsibility falls elsewhere. In fact, 81 percent of parents recognize their responsibility. Aside from the fact that two in five American adults gave themselves a failing grade on their own knowledge of personal finance, many young parents are simply too busy with everyday life -- the way you were too busy to teach your own kids. You, the grandparent, can lend a hand. Not only will you help your grandkids become financially literate, but it's a great excuse to spend more time with them!

You have to talk to your grandkids about money from a very early age, as this is when good habits start to form. Make sure that they come into contact with money, learn where it comes from and understand how it is used. Encourage your them to play "store" at home. Let them put coins in the parking meter. Let them swipe the debit card when you get groceries -- be sure to explain where the funds come from. Bring them to the bank to open a savings account. Make learning a fun, bonding experience.

Help your children start their kids on my Work-For-Pay Allowance System as early as age 3. They do two types of chores: Citizen of the Household chores, where they don't get paid, and Work-For-Pay chores. Citizen of the Household chores teach them that good citizens of the world, the community and of the family, help out because it is the right thing to do. The Work-For-Pay Allowance System teaches them how to earn and budget their money. They will learn values and life skills that they'll need to live in the real world -- and also prepare them to handle their eventual inheritance responsibly.

Help Your Kids With Your Grandkids As The Lessons Continue

  • In an earlier blog, I teach how to introduce kids to the concept of taxes. As we all know, taxes are a part of life. Explain that at their core, the idea of taxes is a great one.
  • Teach the difference between need and want. It seems that kids learn to say "I need it" before they learn their own name. A Need: Something without which your daily living would be impossible, or very, very difficult. A Want: Something that if you had, you'd be happier momentarily, but if you didn't, you could live without.
  • Charitable giving is a lesson with great impact, and it is an opportunity for you to impart your family values. Charity is an easy concept to explain to children, who are very aware that it's good to help others. But, it doesn't come naturally -- it has to be taught.
  • Talk to older kids about investing and the stock market. It is part of the big picture of money as a life skill -- and it's an empowering skill -- a real adult activity that teenagers can take an interest in.
  • The time value of money is a vital lesson - explaining the real cost of purchases
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Remember that your goal is to assist your children in teaching their children, but it could be a good refresher for your own children. The learning should be a fun bonding experience for the whole family. Now you should be able to sleep better. Regardless of your financial situation, if you're spending time with your family, these really will be your Golden Years after all.

I'd like to hear your thoughts and stories. Please share with us in the space provided.