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How to teach kids the value of money in a time of inflation.
New York Life | May 28, 2024
Learning the value of money is an important life skill. And financial responsibility is one of the biggest lessons a parent or teacher can give a child.
With widespread focus on inflation, this is an ideal time to increase a child’s awareness about the value of money.
It isn’t necessary to explain the exact definition of inflation for your kid to gain an awareness about the value of money. Depending on their age, you may not even want to use the word “inflation.”
Initial ideas you can share:
- Knowing that costs rise over time
- Developing an understanding of how much you can get for your money – an idea about how much money is worth
- The concept that certain events (including events far away) can have an indirect effect on prices (for example, extreme weather or conflicts overseas leading to higher food costs at home)
For older children, you could go into more detail depending on how much they understand, including ideas such as:
- The rate of inflation is the average price increase of a product or service over a given period, typically expressed as a percentage. For example, if a soda costs $1, and that rises by 5 cents over a year, then inflation would be 5 percent.
- Inflation is not always a bad thing – for example, if you own tangible assets like a house, it’s now worth more.
- The idea of having a financial safety net for turbulent times.
By teaching, you’ll learn too
It’s OK if you’re not 100 percent clear on the ins and outs of inflation. When you teach something, you tend to get the benefit of understanding it better yourself.
There are plenty of resources you can use to help you learn more.
This New York Life explainer - Inflation explained: Everything you need to know in 3 minutes or less– is a great place to start.
Your kids might also be learning about prices, the economy, or inflation at school. Ask them what they are learning about to start a discussion.
The idea of saving is also a great lesson to pass on to your kids early on. Making a record of what goes in and out of an account can also be helpful. Simple tasks like having them write down their spending in a notebook or on a tablet will reinforce the value of their pocket money.
Saving money helps teach kids that you can’t always get what you want right away. Understanding that saving money takes time might also help kids appreciate whatever gifts are under the Christmas tree this year.
Games to play
Gamification is a great way to learn, so think about games you can use to help kids with their financial education.
Play a real-life grocery shopping game, for example, buying the same item every week and checking whether the price is still the same. Get your kids and their friends to shop around and see if they can find the same item cheaper elsewhere.
A great way to involve children in noticing the price of things is when groceries – for example, vegetables – have to be weighed on a scale. Again, adding an element of play helps with learning. Playing these games – perhaps with a toy cash register that dings! – is also a great idea for younger kids.
Going further, you could teach your child the concept of hyperinflation, known as rapidly rising inflation. Capture a child’s imagination with stories of suitcases full of cash –or look at examples from history.
Let them earn
There’s no better way to learn the value of money than earning it yourself. If you worked hard for that $5, you’ll think very differently about how you spend it, compared to if you were given the $5 (or if you are always given money when you ask for it).
Depending on the age of your child, decide if there are any household chores that you could pay them for. Two examples could be washing the car or doing some cleaning. This could be their task every week, in return for an agreed amount of money.
Learning the value of money early on will prepare kids for a future that includes whatever economic situation they are faced with.
This article was originally published December 8, 2022.
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Media contact
Kevin Maher
New York Life Insurance Company
(212) 576-7937
Kevin_B_Maher@newyorklife.com