Talking about Inflation with Kids


Children can sometimes understand even the most complicated facts better than adults! The key here is to find out the most proper communication method. Each of them may have a unique way of understanding. While some kids find educational games, others may show interest in knowing the history of what we are teaching them.
Parents interested in our blogs are undoubtedly looking for practical ways to raise financially healthy children.
After making sure, they are familiar with the basics like spending, saving, pocket money, charity and donation, etc., you can take the game to the next level.
Learning more complicated subjects like inflation can be a good start.
It may haven’t occurred to them that their favourite candy bar’s price changes over time. Even if they do, they can’t figure out why. By helping them understand this concept, they grow up with better money managing when they grow up.
In YounGo we’ll take you on a journey of what it is, how it happens, its background, history and amusing methods to make our children want to learn more.
To begin with, let’s dive right into its definition.

What is Inflation?

In simple words, inflation means getting bigger! Inflation in prices means being more expensive. Help them remember the first time they went shopping alone. See if they can tell how much they paid for juice. Now you can go grocery shopping with them again and ask them to read the price tag on that very same juice. Explain that the price increase is what the adults call “Inflation!” The point is it’s not limited to the products or goods. It can also happen in services like when we take our car to the carwash we have to pay more.
Now they may wonder, why does it even happen?

What Causes Inflation?

Countless reasons may cause inflation. Start by explaining the long process of producing items we use every day. From simple objects like a lamp to more complicated ones like cars need raw materials and lots of workers and machines. Sometimes the material companies require isn’t found easily, or the workers may ask for higher salaries.
From time to time, some products may have a higher demand, which means the companies producing them need more material, more workers, etc., which eventually makes them put a higher price on that product.
When these changes happen in the production process, they effectively cause inflation.


Do We Hate Inflation?

Generally, yes! Very high inflation makes the living situation harder for people. It mainly puts more pressure on people with lower incomes. 

It also makes our savings worthless. 

If your children have a saving goal, use that as an example. Tell them when inflation happens, the £25 they have been saving for a couple of months won’t reach them for their favourite toy or clothes because of their price increase. 

However, some people may benefit from inflation. When they own a car, and car inflation happens, alongside its price, also the value increases. 

Are there other terms related to inflation?!

If your kids are prepared for the next level, you can also consider talking to them about deflation, Stagflation, and hyperinflation. 

What Is Deflation?

It simply is the opposite of inflation. When it happens, the prices go down. Now they may think it’s a good thing. However, clarify that deflation can be a sign of a bad economy.
Most of the time, it happens when there is no demand for services or goods. In addition, when the prices drop, people have more trouble repaying their debts.

What Is Stagflation?

You probably don’t want to know as it’s the worst! When “stagflation” happens, not only do we have high inflation. But also, there’s a pause in the economy’s growth. This situation is nearly unfixable.

The Definition of Hyperinflation

As the name suggests, very high and uncontrollable inflation is called hyperinflation. It shows the inability of the government to manage its earnings. Hyperinflation mostly happens when the government has a more spending rate than the earnings.

Fun Fact about Inflation

Some people believe when inflation happens, it will be harder for robbers to steal money from the banks. Because of the current situation, they need to take more money from the banks, and clearly, a £500,000s money bag is heavier than a £20,000s bag!

Who Decides about Inflation and its Rate?

Try to clarify that a financially healthy country should have a steady and low inflation rate. A logical inflation rate is necessary and helpful, but it shouldn’t get out of control.
In the UK, the government sets a goal for price increases each year. After that, it’s the Bank of England’s duty to keep the prices in that direction. The annual inflation rate has risen to 6.2% in 2022.

What Do You Know about the Basket of Goods?

Now that your kids are familiar with inflation, its causes, other terms, etc., it may be a good time to talk about the basket of goods.
Start by asking them to imagine a basket and fill it with the goods they imagine is essential in our lives. They may mention fruits, chocolate, or chips!
Explain that this basket includes the goods people regularly buy. The government constantly keep track of these items’ price in this basket overtime to take control of inflation.
The basket of goods is updated from time to time as peoples’ needs and wants change over time.

inflation talk to kids

Is There a Way to Make Inflation Fun?

Talk about how the salaries change due to inflation.
To make it fun and make sure they understand the basics, you can ask them to calculate their pocket money based on inflation. Then you can consider giving them that extra amount!

To Wrap Up 

Our #11 or #12 year-olds can simply understand the meaning of saving, spending, interest rate, investment, etc.
By teaching them about inflation, it’s like they’ve taken a step forward toward the real financial world.
Try to keep it simple. Use stories and examples to prevent it from getting tedious.

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