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Knowing how to raise a money smart grandchild starts with knowing how to utilize various saving methods. Make it fun and a learning experience and then throw in a reward and you will have an apt student who knows the value of a dollar.
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SmartyPig.com is a fun way to teach children to save money for specific goals. Children usually have a low threshold for delayed gratification. That is why using SmartyPig is such a good idea. Children can create monetary goals such as saving for a new bike and then watch as they inch their way closer to their goal.
The nice thing about this savings account - as opposed to a more traditional one at a local bank - is twofold. First, the account can be managed by both the grandchild and grandparent regardless of location. This means that even if Grandma lives in California and the grandchild lives in New York, they can both easily access the account. Second, Smarty Pig offers a unique social networking component. Account holders can make their goals public and their friends and other family members can contribute to the goal and watch how the child is doing on achieving his/her goal.
Learning the value of saving money to buy an object rather than simply having a large ticket item given to you or bought on credit is a valuable lesson. It helps the child learn the importance of paying with cash rather than instantly satisfying every desire with credit, a lesson that can save them a great deal of money in the future.
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Savings bonds can be a great way to teach grandchildren about saving money. There are three types of bonds but there are several products sold by the US Treasury that are also good investments. The three types of bonds are Treasury Bonds, I Savings bonds, and EE/E Savings bonds. If you want to start a nest egg for your grandchildren, Treasury Bonds are probably the best choice since they pay interest every six months but can’t be redeemed for thirty years. If you want something that shows growth and is accessible more quickly, then chose one of the other bonds. Both accrue interest over the life of the bond and can be purchased from $25 to $10,000.
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Saving for college is a long term goal that children will certainly appreciate once they are ready to begin college. The most popular saving method for college is a 529 plan although there are also state-run, prepaid programs and other private options. The 529 allows your grandchild to use the funds for any education expenses that are covered such as books, room and board, supplies, and tuition. This can be an enormous asset, especially if he or she has a scholarship that pays only for classes.
You always control the account even after your grandchild is able to use it so you can help him or her make the best choices on how to spend the money. The earnings are tax-deferred and may be exempt from federal taxes when used for proper education expenses. The money can be used for other reasons, although taxes do apply and there is an early redemption penalty.
If you have been wondering how to raise money smart grandchildren, teaching them the importance of saving money in order to afford the things they want is one of the best lessons. From financing a bike to reducing or eliminating the need for student loans, being money smart will be a skill that will serve them well throughout life.
Photo Credit: Robin