Giving your child weekly or monthly pocket money is a great way of teaching them how to manage their own money and understand finances in a better way. In combination with creating chores to physically earn the money sets a good foundation to work from.
With the school holidays nearing, this blog will give you a 5-step guide on how to manage summer holiday finances as a family and give your child the opportunity to gain a financial understanding by creating savings goals and a chores roadmap to hit them too!
Giving a child the ideal support they need to feel confident for their financial future is something that most parents strive for. But exactly how to practically do it is not very clear.
This being said, there are some good strategies some of which can be found in the media! Last week, for example, we saw an article in Financial Times where the writer Lucy Warwick-Ching emphasized the importance of involving children in the family's daily economy, such as grocery store purchases. The article also highlighted the importance of allowing children to have exposure to money as young as possible, which is in line with the Gimi manifesto, to allow children to practice managing their own money.
As the summer holidays are nearing, we hope that this blog post can be helpful to parents hoping to encourage their children to save a little money in time for schools finishing for summer.
Although the recent Corona virus has made it difficult to firm up specific plans for the summer vacation we perhaps are dreaming of a slightly different summer right here in Sweden. And these holiday dreams often affect our own economy with more expenses than we realize.
In this blog post you will gain 5 research-based tips on how you can guide your child to start saving for their summer vacation and also gain a valuable financial understanding too.
- Let your child decide and focus on the positive
In order for humans to succeed in their changing behavior and perhaps adding a new habit, it is important that we are able to see a clear 'what's in it for me'. In order to do that, the new habit must be something we ourselves want to do to achieve a specific result. The same goes for our children.
So in order for your child to change their financial behavior and start new routines, he or she must understand the why, and the goal should certainly be something that they themselves are looking forward to! The easiest way is, therefore, that the child "owns" their new savings behaviour by setting the rules of the game themselves, of course with a little steer and support from you the parents too.
Also, remember that it is much easier to change a behavior if we see what we will get if we succeed rather than what we will lose if it does not go according to plan. Therefore, our advice is to talk in terms of "then you will be able to eat the most expensive ice cream every day!" instead of threatening with "If you don't do it you will only have one ice cream on the weekend". This is called positive psychology and is something the Psykologifabriken writes about in this post which you might find useful to read: positiv förstärkning – en effektiv metod för att förändra beteenden.
- Do it together
Based on a lot of research, Gimi has previously stated that children inherit their parents' financial habits. As you can imagine, it can therefore be of great importance that you, as a parent, set a good example to help your child to develop good financial behavior. So why not make this summer holiday savings initiative together?
Sit down together as a family and talk to each other about what each of you would like to save for or spend on during this summer. Maybe it's eating ice cream on the beach, cycling downhill in a nature reserve or being able to walk in shorts and t-shirt. Then try to reformulate these summer dreams into savings dreams; what does it take financially wise to get them fulfilled? Let everyone decide their dream and then support each other in a family mission to get them fulfilled.
- A distinct target
If your children enter a dream into the Gimi app, you as a parent or supporter can use any other app or open a separate savings account to deposit or put the earned money to one side. Attempt to make the dream inside Gimi as clear as possible; add a photograph of the result, enter how much it will cost and decide when the dream should be fulfilled. The SMART model is a method that is often used in connection with goal achievements, it is based on that the goal should be specific, measurable, approved, realistic and timebound.
If the dream is to “eat ice cream” then decide if it is for example one ice cream a day, if it applies during June, July and August and what each individual ice cream is expected to cost, based on that you can set an exact price for the dream. When you have the sum, use the Gimi Dream calculator to get an understanding of how much money needs to be put aside each week in order to have all the money just before school closure or the date set.
- The combination of earning more and spending less
How the goal is to be met should be very clear for everyone. It is usually a combination between spending sparingly and earning new money. The more roads to the destination, the better, you can gather some inspiration for this with some other blog posts which you can find here.
Coming back to the SMART method, it is important for the child to set up their own method so that it feels approved, with the support from you, of course. Let your child decide what they are prepared to do to make their dream come true. It can be a trade-off between perhaps buying less Saturday candy and deciding to take care of the dinner plates every other day, or buying the same amount of candy, but then have the washing up responsibility every single day.
It usually helps for your child to see you making the same balances too; should you stop buying take away and choose to take a lunch box instead or should you clean your basement storage and make money by selling things you no longer use? Be open and transparent about what you are going to do so that your children can process it, and as we said, children do not do as parents say - children do as parents do. Remember you are doing this together!
When the trade-off is complete, enter the recurring chores in the Gimi app right away, then the first step to making money is already underway! Maybe it's chopping vegetables for the Friday tacos every week like Elvira in her mom-daughter challenge.
- Understanding the value of a “bonus”
To understand the value of "letting money rest", the savings bonus is a perfect tool inside Gimi. It is similar to interest and is a smart way for your child to see the benefit of not only making money but also putting the money they have to one side, if you need it we have a smart post about economy facts which you can refer to (read here).
Agree on how much bonus money the child should receive and be clear that this is just a bonus and not money which is usually included in their budget. This is to clarify that the bonus can easily be changed based on how the world changes, for example during a crisis. Through the bonus, the child will see that the money grows as long as they add new money, like a plant that gets water or a sourdough that is fed. Simple!
Right now, we are in unusual times and with that has come a few more questions from our children about money, so if you want a few helpful tips on how to talk to your child about the impact of the economy during the corona crisis this blog post should help to guide you.
In summary, you will give your child a financial understanding by letting them do the job themselves. You as a parent should be there as support but it is your child who chooses their summer dream, who sets up rules and vision independently. It needs to be your children who do the work and they are the ones who receive the reward. You only give the tools, for example via the Gimi app.