Today, many families are concerned about the potentially adverse effect of wealth on the financial values of their younger generations. The goals that many affluent parents and grandparents have set for their children or grandchildren reflect core values, an honest work ethic, and a desire to "give something back" to the greater community.

The skills and knowledge needed to help children adhere to these values should be developed early in life and continue well into adulthood. The following strategies can assist older family members in becoming positive financial role models.

Start early- According to recent research, parents can start talking to children about money by age three. Between four and five, you can explain the importance of good spending habits, and by age six or seven, you can help children open a bank savings account. By the time children reach their mid-teens, they should start seeking after-school and summer employment.

Support education - Personal finance education helps instill such pragmatic money management skills as setting a budget, balancing a checkbook, understanding the role of debt/credit, and developing strategies for funding college. Encourage your child's school to offer personal finance as an elective "life skills" course, send your teen to a community college/adult education class, or tap the many educational resources on the Internet.

Lead by example - Your children will learn their most valuable lessons about money from the examples you set. A few simple rules: Enjoy the fruits of your labor - but don't go overboard. Set a healthy example regarding credit/debt. Pay bills on time. Save and review your savings plan on a regular basis. Above all, be consistent. Grandparents can be especially effective role models by following these suggestions.

Practice incentive planning - To ensure that important life goals remain at the forefront of your children's/heirs' priorities throughout their lifetimes, incorporate the use of incentives in your estate plan. What exactly is an incentive trust? It is an estate planning tool that allows you to reward desired behavior or impose appropriate penalties for undesirable activities. It also provides a way to address the needs of beneficiaries who require special assistance. Common themes guiding incentive trusts are education, moral and family values, and business/vocational choices, as well as charitable and religious opportunities.

Encourage philanthropy - Wealthy families often use philanthropy to convey the message that their success has been the result of hard work and good fortune and that success comes with the responsibility to give something back. If you want to ensure future generations of volunteers and donors, you must teach children how to give of their time, their skills, and their money. Once children understand the scope of their contributions, philanthropy becomes a real and prominent part of their lives.

© 2010 Standard & Poor's Financial Communications. All rights reserved.

 Tracking #623068