People regularly talk about the economy, whether in the news or at home among parents and guardians. When children hear phrases like “the economy is doing well” or “the economy doesn’t seem good right now,” they may start to take an interest in understanding what the economy really is and why it matters to them.
Providing an Overview
The economy consists of three things: all the people who make things, all the people who use things, and all the buying and selling of those things. If a country isn’t making much and isn’t selling much, then everyone will have less of the things and less money – that’s when people consider the economy to be “bad.”
Avoiding Technical Details
Giving children a detailed and complex definition of the term “economy” is likely to make their eyes wander. Adults may also have to stifle their yawns if they have to sit and explain the economy in a traditional way.
Illustrating Things Realistically
It may be best to discuss how the rises and falls in the economy directly affect your family and friends. You don’t want to get too detailed, nor do you want to seem overly optimistic or pessimistic, but there are some examples you can give children about how economic news impacts the real world:
- When the economy is bad, it means we shouldn’t spend a lot of money right now. We should buy only the things we need and try to make our money last longer until the economy improves.
- In our current economy, most people can find a job, which may enable them to afford taking their kids on vacation and buying necessities like food and housing. Sometimes it can be hard to find a job. We should empathize with those who are struggling. They are doing their best to work, but they may not get a job until the economy improves.
- The price of something we want to buy is going up, so we have to decide whether we want to buy less of it or wait until the price goes back down.
- The United States can send money to countries with worse economies. We can also help families there by assisting in buying food and building homes.
Being Careful with Words
Remember that in most cases, it’s not just what you tell your child that will shape their understanding of the economy, but also what they hear when adults talk to each other. Children absorb everything, so it’s important to choose your words carefully when discussing the economy and all financial topics in general.
Making It Real
The best way for children to understand the meaning of the economy is to allow them to see and understand financial transactions. When you feel your child is ready, show them how to earn money from chores. Teach them how to save it, budget it, and save for big purchases. This helps them understand the importance of making economic decisions before they get their first job and start learning about the economy in the real world.
Once your child earns some money, you may want to help them set up a savings account, with the most common option being a checking account. They will need an account eventually, and it’s never too early to start saving. They will feel excited to do something “big” like going to the bank to set up the account. After opening the account, encourage them to set savings goals and help them come up with a realistic plan to achieve those goals.
Keeping Things in Context
The economy is very complex and vast overall. As mentioned, most adults don’t fully understand all the factors that impact the economy daily. Trying to hide your knowledge gaps or oversimplifying a concept may weaken your child’s understanding.
Instead,
From this, all conversations about the economy should include comments on how you can always learn more about economics – but good economists seek a balanced background of knowledge. Adults need to follow the economy and have a basic understanding of how it works, but it is not the only factor that affects society.
This provides an opportunity to talk about the importance of charity and empathy. Talk to your child about the ways they would like to see the world improve, and help them find ways they can donate a small part of their allowance to contribute to this good cause.
Better yet, see if there is a way your child can use their resources to help someone directly. Perhaps they can buy and prepare food for a nearby homeless community or organize their classmates to help clean up a park. These acts help children learn that money and resources are useful for buying and selling things for personal benefit, but they can also be used to help our neighbors and improve the economy in the process.
Frequently Asked Questions
When can you start teaching your kids about money?
There is no time too early to talk to children about money, but the conversation should be age-appropriate. The younger the person, the lighter the conversation should be.
Where can parents find information to teach kids about money?
The Consumer Financial Protection Bureau (CFPB) provides educational resources to help parents throughout their children’s lives, starting at age four.
Source: https://www.thebalancemoney.com/economy-definition-2085358
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