How to Teach Economics to our Children?

Within the education we give our children, teaching economics is one of the pending subjects in most cases. Teaching how economic relationships work, the concept of income and expenditure, the value of things or the concept of money and its use is not easy to transmit or even learn.

To face the teaching of the functioning of the economy in our children, we must follow some basic criteria and a series of rules so that they know how society works and the economic relations between individuals. Here are the first three rules to teach economics to our children and that they know-how to value what they have.

The Exchange of Goods and Services, the First Lesson

Determining the appropriate age to start economic education is complicated, since each child shows a different capacity for reasoning and learning throughout his life. In any case, the first concept we should teach a child is how bartering and the rudiments of trade work.

This teaching is practically an innate teaching since on many occasions, we teach our own children the concept of barter through teachings of good-bad or right-wrong. Using the phrase "if you're good, let's go to the movies" or "I'll buy you this gift if you pick up your toys" is one of the first approaches to bartering.

On this basis, we can explain to a child with relative ease how trade and the exchange of goods or services work and simultaneously we can introduce the concept of money as a key element for the standard valuation of any exchange.

What is money, explained for children

Explaining what money is to a child is a bit complicated if we want to understand money in the same vein that we adults handle it. One of the best definitions of money for a child is the following:

Money and its different representations (bills, coins ...) are the symbol of the value we give to things to be able to exchange them for other things. If we use money, it is easier to put people in agreement to be able to exchange what we need and what helps us to live better.

At this point, parents, we can explain to our children how parents get money through their work and with that money, they can buy things for their daily life. Along the same lines, we can explain that if we do not have money for our work, it is very difficult to make an exchange with other people.

A simple example for our children to understand this mechanism. Suppose that the parents work in a car dealership and that instead of paying you with money, in exchange for your work, they paid them in vehicles or car parts. If later, we want to buy food in the supermarket, they will not change our food for those car parts, since they do not need them in the supermarket. On the contrary, if in the job of selling cars, they pay us with money, if we can exchange it in the supermarket for food.

The value of things, what two parties are willing to accept

Finally, the next phase of basic education in economics for our children is to explain how the value of things is quantified and how the value of things is always relative. This value is very easy to explain as long as we define that this value is what two parties are willing to accept for it.

Just give them a couple of examples contextualized at their age. Suppose we are in the jungle and we have no shoes. How much would we pay for a light bulb in the jungle? Its value would be zero, since in the jungle itself we do not have electricity and therefore we would be buying a useless object.

However, if someone offers us some boots if we could pay for them the amount that we consider reasonable and that improves our walkthrough the vegetation.

How to make our children value what they have?

Valuing a product, service or else implies being aware of the effort we need to achieve it. Value is a relative concept and it depends both on the need we have for that thing, and the effort we have to make to achieve it.

All parents explain the value of things with effort or reward mechanisms to their children with the examples that we have already set. Translating these values into the monetary field can be done by comparison as a first approximation.

For example, we can explain how much we have to work to pay for our housing or how they themselves obtain good rewards or gifts if they achieve high goals. Translating a gift, a trip or a vacation monetarily can teach them directly how subjective values are translated into economic tuition terms and they will learn to value what they have in a formal and emotional way.

In summary, the first thing our children have to learn is the rudiments of trade, how the exchanges of goods and services are carried out and how the value of things is conditioned by the need we have for them and by the supply and demand that exists in each of the situations that we face on a day-to-day basis.