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How do I teach my child about money?

July 3, 2020

Teaching children about money is about understanding how children acquire knowledge, how they value it and how they become motivated to learn more. This is something that educators have a solid understanding of and as a parent it can sometimes feel unfair to bear all the financial education responsibility itself. As a pillar and guide, we at Gimi want to help you in any way we can with this issue. In this blog post, you will receive three important building blocks on exactly how you can teach your child about money. We hope that it will facilitate your family and that you will gain an understanding of the importance of practical exercise, praise and inner motivation for your children. Good luck!

Teaching children the value of money and giving them the basics for financial understanding not only helps them become financially literate, it also provides them with better conditions for coping in society, both socially and in the workplace. This is something that the teacher and author Erik Wennstam emphasizes when he describes how financial literacy is also is a matter of democracy and equality. If you haven't already read the interview with Erik, you can find it here.

To understand that children, as early as possible, are able to gain financial self-confidence and financial understanding is a matter worthy of high priority on our agendas. In this blog post we will go into how you can practically increase your child's financial literacy skills. By following our three suggested cornerstones we hope to provide you with a secure starting point which will be ideal for you to action in combination with the use of the Gimi app.

1. Let the children practically practice managing their own money

Allowing children to access their own money and thereby letting them make their own decisions about how the money should be saved and spent is important for them to increase their financial literacy skills. This will lead them to see the connection and consequences of their actions, something that Lotta Björkman, assistant professor of pedagogy at the teacher education at Södertörn University, describes in an article of NE, Nationalencyklopedin (see here).

“The basic theory is that we must experience something and reflect on it, in order to then learn. The theory alone does not work. Only after we have experienced and reflected can we abstract what we have learned and gain new insights and ideas. Then it's time to test our knowledge of the outside world."

So it can be said that it is not enough for children to get their financial education explained, they must also get practical experience of it and what it means. Just like when we learn to drive a car. The combination of theory and practice is needed in order for us to best understand how the vehicle is to be driven in real life.

Allowing children to make mistakes, for example by spending their money on something that you as an adult experience is very helpful. Only when a child experiences a consequence of his or her actions can he or she learn from it. Therefore, we recommend not stopping your child or telling them how to do it, but instead letting your child test for themselves.

As a parent, it is also important to try to combine theory with practical experience, something that Gimi helps with inside the app. For example, children can learn about how interest works by their parents being able to add a savings bonus to the app and watching it grow. You can also watch the theoretical videos located in the educational section of Gimi's supporter version of the app and then complete the practical tasks associated with it. At Gimi, we are constantly working hard to update the app and add more features which educate and motivate our users, please read about the latest updates and what's coming soon with the Gimi app in this blog post: New with Gimi - More pedagogy and gaming!

2. How to support, praise and comfort the child's financial education

For some children, saving and finances are very easy to understand while for other children it can be difficult to see the connection between a full Saturday candy bag and an empty account. Maybe you can recognize that one child has the whole weekly allowance left when a new Saturday arrives, while the other child asks for more money the day after. This is not just about the fact that some children are orderly while others are careless or that you as a parent raise your children differently. The ability to be thoughtful and not act on their impulse is to some extent also based on the child's genetics. The difference between being a saver and being a spender can thereby, to some extent, be innate. Something that psychologist Per Höglund describes in SVD's article about children and weekly allowance. (read article here)

However, Per Höglund clarifies that it is possible to support your "spending" child so that he or she can become better at managing the weekly money. He believes that the rule of thumb to have this approach is to let the child practice and take responsibility, while you as a parent focus on the role of giving praise and consolation. The important thing is not to blame a child's spending, but instead to support when things go wrong. Often, the child themselves will feel some sort of shame about their decision, meaning that a scolding only aggravates the situation. Consolation, on the other hand, makes the child stronger and dares them to try again. So be proud that your child is practicing to improve and that they actually dare to make mistakes.

Consoling and peeping instead of pleading guilty is also something that teacher and teacher educator Anne-Marie Körling describes in an article about children's homework reading. She believes that as a parent, you should think about the fact that the child needs to practice to learn, is it the first time your child is going to buy something or create a savings goal, you cannot expect the child to know how to do it. So instead of questioning the child, it is better to listen and ask the child to tell. Anne-Marie exemplifies this by describing how you, as a parent, should avoid statements like "Can't you do this?" or "how difficult it seems" and instead say "do you want to tell me more about this?" You can read the full article from SVD here.

Adapting financial education based on each individual child is also something that researcher Agata Janiszewska describes in NE's blog tre röster om hur vi lär oss (three voices about how we learn) Read the article here . She explains how digital tools can often facilitate learning and how these should be given more room in school education. Digital tools make it easier for the teacher to customize the education given to children. Something the Gimi app is a clear example of.

"As a teacher, it is important to let the students themselves solve problems that arise and in good digital learning material, these such opportunities are built-in for the students."

3. Let the child find their intrinsic and extrinsic motivation

The things we think are fun and that we feel inspired about are often also the things we become good at. It's about feeling a motivation and a desire to exercise, learn more and get better. In psychological contexts, one often talks about this driving force in terms of an intrinsic and extrinsic motivation.

The extrinsic motivation is about getting the drive to earn the reward by completing an activity. When referring to an app such as Gimi, an example would be that your child may clean the dishwasher because he or she knows that will give them a reward in the form of extra money. The driving force is thereby that the child wants to have a positive consequence or outcome from their actions. Extrinsic motivation can also be about a driving force to do something in order to avoid a negative consequence, for example getting a scolding for not removing the dirty laundry.

Instead, the intrinsic motivation is about the feeling around the task itself, that we do something because we feel that the activity gives us added value. Again, when we speak about an app like Gimi, we can see this in practice when your child is chatting with Piggy about money without your input or suggestion. Your child is learning new things and thinks it is fun. The same is true when your child is practicing the act of transferring money from the account to the savings or vice versa, it is a feeling of maturity and a pride in being able to decide on their own financial situation. Internal motivation could also be that your child helps with writing a shopping list and sets a budget for the family's ‘fredagsmys’ (cosy Friday time). The shopping list or the budget itself is not the important part here, but the task is fun in that it creates an understanding of what things actually cost.

If you want to learn more about the phenomenon of intrinsic and extrinsic motivation, you can read the thesis ‘Inre och yttre motivation. Hur upplevs de och hur relateras de till prestation?’ (intrinsic and extrinsic motivation. How are they experienced and how are they related to performance?) by Elin Schildt. You find the thesis here.

In summary, children, just like adults, need a combination of intrinsic and extrinsic motivation to learn new things. The extrinsic motivation gives the child the conditions to fight, i.e. the carrot or the whip, whilst the intrinsic motivation is the safe feeling the child can lean back on. In order to create motivation for your child, it is therefore a matter of providing information that incites the external reward whilst also providing valuable content giving them an inner drive.

In the Gimi app you will find both examples of chores that focus on the reward after completion, for example mowing the lawn, and tasks where the activity itself is value-creating, for example repairing broken clothes and helping the environment. Regarding the child's savings goals, it is also a combination, both an extrinsic motivation that the child ensures that their dream is fulfilled and an intrinsic motivation in the feeling of succeeding and learning something during the journey.

The National Agency for Education (Skolverket) also emphasizes the importance of intrinsic and extrinsic motivation and how it should be prioritized in the learning process. Educational researchers Margareta Maria Thomson and Jessica Wery, active at North Carolina State University, describe in an article (which you can find here) how a child's ability to successfully achieve a goal or solve a problem is affected by the environment the child is in, the nature of the task, the child's well-being, self-image and belief in one's own ability.

"The motivation to participate in a learning process increases if the student experiences that the work process leads to them confirming their own ability and self or being confirmed by others."

Finally, we would like to advise you to keep an eye on this blog post: New with Gimi - More pedagogy and gaming!. This will be a great place for you to discover new product launches and up and coming new features before they hit the app. In the very near future we are placing extra focus around the inclusion of education and pedagogy components to the app, whilst considering how to combine our approach in a gamified way. Watch this space!

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