As our kids get older they ask very difficult questions to answer. Where do babies come from? Is there a god? What’s the economy? While we might not be able to help answer the first two questions, we can help you explain the economy to your children. The economy in the simplest of terms is all about money being made and then how that money is being spent. Here are some concepts that you can explain to your children about how the economy works:
There are two groups that make up an economy: buyers and sellers. For children, it is easy for them to understand that when we shop in a store that we are buyers and then the store is the seller. But it’s also important for them to understand that going to work makes us also sellers. We sell our time and knowledge to our employers who then buys it from us by giving us a salary.
When people in the country have more money they need in order to survive this is called a surplus. When people in the country don’t have enough money in order to survive this is called a depression. It’s important to also stress what the phrase “in order to survive” means. Can they survive without toys and video games? Can they survive without food and shelter?
Games that teach out to balance resources and money are great for kids to understand how the economy works. Games such as Pay Day, Powergrid, Monopoly and The Game of Life can show how expenses come up unexpectedly and how a slow economy can impact cash flow.
The best way to show them the impact of the economy as a whole is to show them the fluctuation in gas prices. Bring them to the gas pump and show them how much one-gallon costs. Write a list of all the prices that you see each month. If the price of gas goes up – which means the economy is not doing well – they can see how $2.50 will no longer be able to get them one gallon of gas. If the price of gas goes down – which means the economy is doing well – they can see how $2.50 can get them more than one-gallon of gas.