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Talking to children about an economic crisis

May 18, 2020

Sweden and the rest of the world are currently facing a huge financial strain, but we are sure that’s not news to you. The uncertainty is imminent and at the same time many parents feel that they have a responsibility to let everyday life continue as usual, for the sake of their children.

A question we want to help with answers to is whether it is right to talk to a child about the unstable economic situation and explain to them how it affects us on an individual level?

In this blog we hope to give you the answer!

To not worry the children but at the same time describe the seriousness. To get the family puzzle to work without help from grandparents. In addition to that, to handle increased costs for consumables and at the same time being afraid of losing your job perhaps. Yes, these are just a few examples of the dilemmas many parents are facing right now. Therefore, it is no wonder that parents, who are right in the center of this everyday stress, want to exclude children from the complete information flow. But maybe it is right now in fact, in a situation when the world economy is swaying, that it is extra important to meet the children's need of getting information and helping them to understand the situation more. Otherwise, could there be a risk that the children might accumulate their unanswered questions, which after a while may grow into clouds of fears and end up a lot worse in their mind.

For a child, it can be very difficult to understand how a disease can make such a huge impact on society and how it could be linked to money issues for the family. It is understandable that a child should wash their hands, keep a distance and not meet older relatives, but why companies are shutting down and why parents can no longer afford things can be more difficult to understand. That is why we at Gimi, now more than ever, recommend that parents set some time aside to talk about the topic that is closest to our hearts - money. Keeping the couch hangout together, but trying to switch 15 minutes of TV to 15 minutes of money talk- it could be time!

The value of financial literacy

The understanding of money and the value of it is a big advantage in all situations. Whatever we do and how we live, money matters, either by earning it, saving it or spending it. Our economy is often perceived as "adult talk" and in many contexts it is just that. This is because we have historically been very careless of adapting the conversation about finances to a level that is suitable for children. That is something we at Gimi want to change! The sooner a child gets an understanding of money, the more likely he or she will have a positive economic development for the rest of their lives. Read more about Gimi's manifesto and how our financial habits are formed in an early age.

Like Lilla Aktuellt, Gimi has adapted the "adult talk" to a level suitable for children. Since the combination of practical, social and meaningful learning on a regular basis has proven to be the most effective method of learning, Gimi has designed the app with this in mind. Inside the Gimi app, there are parts where children can do practical tasks to earn extra money, views where they can see the regular weekly allowance and education segments where they, together with their parents, can get tips and tricks on how to spend their money in a smart way. The educational segment is inside the parents app and consists of videos that are an inspiring and fun way to understand how finances and behavior are linked. By the way, did you know that all educational material inside the Gimi app is based on research? Read more about Gimi's research work

Talk about the financial impact of the Corona
Now back to our current situation, linked to COVID-19. The situation right now is obviously strenuous on everyone, but perhaps a perfect opportunity to bring up topics that otherwise may feel awkward and emotional, such as the topic of money. So to answer the introductory question "Should one really talk to a child about the unstable situation that now prevails and tell how it affects us on an individual level?" we say YES, but do it in a way that is adapted for children and relevant to today’s climate. The easiest way is often to start by asking the child themselves, what they are thinking about.

Below we have created some examples of questions that children can carry with them during these times and examples of how you can answer them!

What happens now, when my best friend's dad has lost his job? Can they not afford to eat now?

Reply with an example: Daddy Anders works at the cinema where he earns SEK 100 per hour. When Anders gets his money (his salary) he divides it into three parts; SEK 30 goes to his savings, SEK 60 goes to essentials like food, rent and toilet paper, and the last SEK 10 goes to his savings dream, a motorcycle.

When the cinema closes, Anders loses his job and he therefore doesn’t receive his salary. Since Anders has saved SEK 30 on every hundred he earned and he has a lot of money in his savings account. Anders has also saved money for a motorcycle, so in the dream account he also has money. Now when Anders stops receiving salary, he takes money from his dream account to pay food, rent and toilet paper with instead. If the money in the dream account runs out, Anders starts taking money from the savings account. Since he saved for a long time there is a lot of money in the savings account and Anders does not have to worry about not being able to afford food.

Anders is looking for new jobs every day and when he gets a new job he will start to save money again. He has no money left for the dream anymore, but since food is more important than a motorcycle, it was the right decision to take money from it. When he has a new job, he can easily start saving for the motorcycle again.

Why does Grandma say she will be poor because of Corona?

Grandma no longer works but she has saved money over the years of her life that she uses to pay for food, rent and toilet paper, these are called pension savings. On the saved money, she has a savings bonus, which means she gets more money the longer she let them sit in the bank. Before Corona, grandma had 4% in savings bonus, but now the bank has lowered grandmother's bonus to 2%. This means that grandmother's money does not "grow" as quickly as they used to.

Perhaps you can choose to see grandmother's saving as a basil plant. For example, the basil had 20 leaves when grandma stopped working. Every week, Grandma takes 5 leaves from the basilica and every week 4 new leaves grow. This means that the basil plant will last for 20 weeks. But now that the situation has made finances tougher, the basil plant only gets 2 new leaves a week, which means that grandma can only take 3 leaves from the basil plant if it will last for 20 years. Grandma feels poor because she now can't take as many leaves as she is used to and it means a slight change to her lifestyle.

What is meant by the Football Association going bankrupt?
The Football Association makes money from people buying tickets to the adult players' matches. If all matches are canceled then no tickets will be purchased and the association will not receive any money. But the Football Association still has to pay rent for the clubhouse and pay salaries to those who mow the lawn and also the salaries for all of the football coaches. If the association has saved a lot of money, they will suffice to pay all costs, but if the association has not saved so much money then there is no money to pay with and then the association must close down, which is to say that they would go bankrupt.

Hands-on, social, meaningful and continuous

In summary, it is very good to include the money topic into children's everyday lives. This through practical exercise, social conversations, meaningful contexts and on a continuous basis. Are you interested in reading more about this and the research behind it you can click here to read more from Gimi.

Are you ready for smarter pocket money?