Inflation Games With Our Kids Can Give Them A Financial Education

Teach kids Financial Literacy with an inflation game

“Inflation is taxation without representation.”

-Milton Friedman

Inflation is affecting the cost of living for so many families today in the United States and around the world in adverse ways. It seems like every time we go to the gas station or the grocery store we have to prepare ourselves for the food and energy price shock that we know is inevitably coming our way.

And when it comes to our kids, depending on their age, they may not completely understand why we can’t go out to eat on Friday night or why we can’t get ice cream on Tuesday night as usual.

Explaining the concept of inflation to them is not always easy (it’s hard enough to understand it ourselves), but we can actually take this opportunity to help educate them around money with lessons that can stick with them for the rest of their lives.

Financial literacy for kids is extremely important, and when they get older one day and see a similar environment of inflationary pressure (they are almost assured to see something like this again in their lives), they will be better prepared to handle it because they will remember what you are teaching them now and know what to do.

For starters, we have an extremely simple inflation breakdown in our prior post, Explaining Inflation To A 6 Year Old, and also ways for the family to try to get through these times with our post, 3 steps to take to help protect your family from inflation.

In this post, we wanted to focus on how you can turn some of the inflation learning into games to try to keep things as light as possible in these challenging times.

Budget Games 

Budgeting effectively is one of the main ways that we can combat inflation, and when it comes to our kids, we can absolutely get them involved in the process. Now when it comes to budgeting, the hardest things is always sitting down and actually making a budget.

You can use online apps or a simple sheet of paper. If needed we have created a free downloadable excel file on our guides and tools page you can use for a budget. We also have a free printable budget game we made for the kids here. The actual medium you use to make the budget we think matters less than making the actual budget itself.

You can sit down and create the budget with your kids help if you feel they are old enough to handle the exercise, but once you do have the budget, that’s also great time to get them involved. Give them a goal, say for example something like, “the family would like to save x dollars this month and you can help!”

Whether its helping find discounted items on trips to the store, chipping in and earning themselves (if they are currently ready to do so), or simply just serving as another eye on things to check in and keep the family on their goal.

As a reward, you can promise that if the family is able to save a certain amount they will be able to use a (small) amount of the savings for themselves. This can help spur action and commitment if they know not only are they helping the family but there may be a reward in it for them at the end.

Earning Money

We talked about this above a bit, but if your child is at the age where they can get at least a part time way to earn income (we have some cool suggestions on our guides and tools page) this may be a fun way for them to get paid doing something they are interested in and also help out the family. Earning more during inflationary times is always another way to help the blow and there is no reason that, if appropriate, the kids can’t help out.

In order to get started, we would spend some time with them to find something that they are interested in (maybe it’s selling some artwork, or a few old toys, fixing something around the house, or helping babysit for another family) and talk with them about how they are helping out the family. Make sure to talk with them about inflation and the idea that earning more money creatively during times like this is a way to get through.

Now, we would always recommend keeping this as lighthearted as possible and not forcing our kids to do labor they do not want to do. One way of doing this is similar to playing budget games above; the family can have an extra earning goal or jar for the month and at the end a certain portion gets used for something fun (maybe a night out to dinner or ice cream for the whole family).

Tracking The Micro (The Prices They See Every Day)

While there are macro (fancy term for “big picture”) indicators we can teach our kids to track, we can also teach them about inflation by looking around at the micro (fancy term for “what is right in front of you”) world that we deal with day to day.

When you are out shopping with them, maybe have them notice and start tracking prices at the store on various items. When you go to fill up the car, you can have them track prices at the pump week to week. Any way to get them observing the changing world and prices around them is a great start.

Getting them more involved in every day things the family consumes each week or every few weeks (ex. groceries, gas, household items) can be a wonderful way to help them get an understanding and see how prices are changing all of the time.

In similar fashion to the above you can also make a game out of this. If they are older and able to be out on their own, have them report anytime they find a gas station with the lowest prices (that’s savings!), or have them go shopping and look for which products may offer better value than others at higher prices (teaching them the concept of price vs. value, one of the most important in all of finance). .

Tracking the Macro (The Broader Economy Measures)

Three common indexes people look at to gauge inflation (we will have more detail around these in a later post) are the Consumer Price Index (CPI), the Personal Consumption Expenditures (PCE), and the Producer Price Index (PPI). We have included more information on all three below in case you want to get into more detail, but from a high level all three of these indices track various different prices across the US economy. People look at and use them as general barometers to see how much prices are rising for the consumer and across the supply chain.

The Consumer Price Index (CPI) takes a basket of prices of goods people deal with and buy every day (think food, healthcare, housing, etc) and weights them based on importance (i.e. housing is 42%, food and beverage 16%, etc). That allows them to come up with a number which they then compare and see how it changes over time.

The Personal Consumption Expenditures Index (PCE) is similar to the CPI in that it tries to measure prices paid by consumers for goods and services although there are differences to the CPI with things like the formulas used or types of entities measured (for example the PCE includes what organizations like non-profits pay for things and not just consumers). The point however is the same, and it is used as another way of trying to get an assessment on how prices paid by consumers are changing which is used to track inflation.

Finally, the Producer Price Index (PPI) measures the average price that manufactures (not consumers) are paying for goods and services. While this index does not measure the end consumer directly, the PPI can be helpful to keep track of when thinking about where prices may be going for you (the end consumer).

The reason is that if manufactures costs go up or the PPI rises, for example, than typically they will have to charge more to end consumers as a result (if their costs go up, then yours are likely to go up as well to help them pay for theses cost increases). The reverse is also true if their prices go down reflected in the PPI moving lower.

All there numbers above are released monthly. The CPI is released by the US Bureau of Labor Statistics here, the PCE is released by the Bureau of Economic Analysis here, and the PPI is also released by US Bureau of Labor Statistics here.

Talking with your kids about these measures can be helpful as a way to follow inflation. You can put the release dates on the calendar and keep track of them every month to see how things are trending. What is also an interesting exercise to do with the kiddos is to combine the micro and the macro: tracking these indices monthly and comparing them with some of the everyday price work talked to above.

What you may find if you do this is that some of the micro prices change faster or more than the numbers you see at the national or macro level every month. This is largely due to the fact that the indices talked to above are delayed (come out only once and month) and are also places average placing weightings on different categories of items (i.e. food prices in the CPI for example is not weighted as heavily as housing costs) which may be different from specific items you are seeing at the store. Tracking this all nonetheless can give them a great handle on inflation and really enhance their financial literacy!

For a simple video explaining some of the terms above in more detail check this out.

For a helpful free inflation calculator to calculate inflation click here.

For our library of financial literacy books that can help teach inflation click here.