"Grandpa, what is a four letter word for someone who has all the money he ever wanted?" The question came from my six year old grandson as he sat on my knee doing the Wall Street Journal's junior scrabble game.

"That is simple, it's 'rich.'" And I even spelled it for him. I wondered what answer he had considered. "What did you have in mind?" I asked.

"I thought that maybe they were looking for H.N.W.I." he answered, "an acronym for high net worth individual."

Was I shocked by his response? Of course. "Let me help you with the next one," I volunteered.

"Ok, grandpa," he said, "that was one across; for one down the hint is: 'taking a chance.' And it's four letters."

Before I answered, I ask him what he thought the correct answer was.

"Well, the words that come to me are hedge, or arbitrage, or margin, but they don't start with an R and they have too many letters."

"How about risk "? I asked him.

He answered, "Eh, no, grandpa, that's the name of a board game and proper nouns are not allowed."

I realized I needed to teach my grandson some basic financial values to live by before he was totally misled by watching Bloomberg and Wall Street Week.

I started with compound interest. I told him that his grandma and I were putting aside money for his college education and felt that a small percentage should be in a basic savings account. The money would grow nicely because of the power of compound interest.

"Grandpa, mom and dad have a different strategy." He explained. "They think I have a good chance of getting a need-based scholarship to Harvard, class of 2021. The plan is for me to continue working with my tutor on the SAT's as they spend all of their money. I should get into Harvard on my smarts, and then get a full scholarship based upon their declaring insolvency."

He asked if I liked the plan. I thought it was crazy. But as a soon-to-be retired baby boomer, I realized I had thought my parents were too conservative in their investments. Maybe I was doing the same thing. I needed to remember that my grandson would most probably never see a dime from Social Security. Maybe taking more risk was actually a prudent way of planning for the future.

And yet I wondered if he understood the value of saving. "Let's get down to basics. Do you get an allowance?" I asked.

"Sure, $20 a week," he answered matter-of-factly.

Sounded like a lot to me. "And how much do you put in your piggy bank for a rainy day?" I asked.

I got that impish look from him (just like his dad used to give me). "What's so funny?" I asked.

"A piggy bank? Grandpa, that's only in cartoons." He answered.

"When you get change of your twenty, don't you put some aside?" I asked.

"Grandpa—I don't get a real twenty dollar bill." He said.

Thank God, I was afraid my kids were overly indulgent with their son.

"So how much do you really get? I asked.

"I get $20, but it's an electronic transfer into my debit card each week." He answered.

"Wait, you don't get cash?" I was surprised.

"Of course not grandpa," He responded calmly. "I would lose it like when I lose my lunch at school."

I offered to give him an extra five dollars a week but that he needed to save it.

"For what?" he asked.

"Let's say you want to give the homeless man on the corner a dollar. You could do it with the money in your piggy bank." I suggested.

"In our Sunday school class, we made him our philanthropy project for the year, and we know he doesn't take cash." My grandson was looking at me like I was from the Stone Age. "He has been ripped off too many times."

"Very generous of you and your friends," I was really impressed. "But how does he get the money?"

His answer: "We direct deposit it into his account."

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