Teaching Kids About Money

Why do we need to teach our children about the economy? Doesn’t it sound boring and they will just get turned off by it? When teaching kids about money, please don’t neglect this topic just because they don’t understand it. That’s where you as the parent need to inform and educate them of the economy because it affects all our lives. To teach kids about money means to give them an overview of all the thing that are happening in this world.

ECONOMIC TERMS TO TEACH YOUR CHILD

Below are a few terms and factors that you can explain to your child as a base for understand how the economy works.

1. Unemployment rate. This term probably comes up on the news and they explain what the employment rate if for a period. When teaching kids about money, we must educate them of this factor as it affects all families. When parents are unemployed, it means that no money is coming into the family. This means cutting costs where needed until the parents get another job. So if the say the unemployment rate is 5%, tell them that 1 in 20 families do not have any money coming in. Teaching children about money means educating them in simple terms,

2. Inflation. Every year the inflation usually increases. A table for example that costs $50 ten years ago, may cost $80 today. So if the inflation rate is 3% for example, something that costs $10 this year will cost $10.30 next year. This is all due to the general rise in the level of prices. It usually depends on various factors within the economy that contributes to the rise of inflation. So when we teach kids about money and saving, inform them that what something costs this year, may increase next year due to the value of money decreasing.

3. Taxes. The government taxes people’s incomes, goods and services, and from other sources as well. Why do they do this? This is so they can use this money to simply run a state or country properly by building infrastructure such as roads and hospitals. When teaching kids about money, this is an important factor to teach. We pay taxes in everything we earn and spend on. As they say there are two certainties in live, death and taxes.

4. Interest rates. These may not mean anything to your children, but it means a whole lot to adults who own a mortgage for example. When we are teaching children about money, we can simply explain to them every time they say the interest rates are going up, it means the family has to pay more in repayments for the mortgage. It also affects savings account where if the interest rate increases, it means the interest they receive back is more as well. When we teach kids about money here, they need to learn that interest rates are a part of our economy and it comes from various economic factors that will result if the interest rate increase or decreases.

To give your child a basis of learning how the economy works is important. This will impact their current and future years and can either increase or decreasing their savings.