Economics for Kids: Earn, Save, and Invest

Have you ever wondered where money came from? Or how you can start earning and saving it?

In their book Investing for Kids, Dylin Redling and Allison Tom explore these questions and more. This article will take you on a journey through the history of money and provide practical tips for earning and saving it, making economics for kids both fun and accessible.

Keep reading to discover how you can start building a strong financial future today!

The Evolution of Money

When it comes to economics for kids, understanding money is a great place to start. Money hasn't always been the paper bills and coins we use today. In fact, the history of money is pretty fascinating! Let's take a quick trip through time to see how people used to trade and how money came to be.

From Bartering to Coins

Long ago, people didn't have money. Instead, they traded goods and services directly. This was called bartering. For example, you might trade a basket of apples for a pair of shoes. As time went on, people started using valuable items like spices, salt, and seeds as a form of currency. These items were practical and valuable to most people.

The big change came when coins were introduced. The Lydian Empire first made coins around the 7th century BCE. These coins had a value based on how much gold or silver they contained. This was a huge step forward because now people had a standard way to measure value.

Modern Currency and Government Control

Today, most countries have their own currency that's not based on gold or silver anymore. Instead, the government decides how much the money is worth. In the United States, the Treasury Department, along with the Bureau of Engraving and Printing and the US Mint, are in charge of making and distributing money.

How to Earn Money

Now that you know where money came from, let's talk about how you can earn some! There are lots of ways to make money, even when you're young.

Use Your Skills and Interests

Think about what you're good at or what you enjoy doing. Do you love animals? Maybe you could start a dog-walking or pet-sitting service. Are you a great baker? You could sell your delicious treats to friends and neighbors.

Start a Small Business

Starting your own business might sound scary, but it can be pretty simple. Look for problems people have and try to solve them with a product or service. For example, if your neighbors always complain about their lawns, you could start a lawn-mowing business.

Get an Entry-level Job

When you're just starting out, entry-level jobs are a great way to earn money. In the United States, you can legally start working at age 14. These jobs might not pay a lot, but they're a great way to gain experience and start saving money.

Saving Money: Why It's Important

Earning money is great, but saving it is just as important. When you save money, you're setting yourself up for a better financial future.

Short-term vs. Long-term Savings

It's a good idea to save for both short-term needs and long-term goals. Short-term savings might be for things you want to buy soon, like a new video game or a bike. Long-term savings could be for bigger goals, like college or a car when you're older.

Savings Accounts and CDs

Banks offer different ways to save your money. A savings account is a great place to keep your money safe and earn a little interest. Certificates of deposit (CDs) usually offer higher interest rates, but you have to leave your money in for a set amount of time.

Online banks often offer higher interest rates than traditional banks. In 2020, online banks were offering interest rates between 1% and 1.35%, while traditional banks were offering as low as 0.06%.

Understanding Investments

As you get older and have more money saved, you might want to start investing. Investing is a way to potentially grow your money faster than just saving it in a bank account.

Low-risk Investments

If you want to play it safe, there are some low-risk investment options:

• Treasury bills (T-bills): These are very safe because they're backed by the U.S. government.
• High-rated corporate bonds: These are loans to big, stable companies. They're pretty safe but offer slightly higher returns than savings accounts.

Higher-risk, Higher-reward Investments

If you're willing to take on more risk for the chance of bigger rewards, you might consider:

• Stocks: When you buy a stock, you own a small piece of a company. Stock prices can go up and down a lot, so there's more risk, but also the potential for higher returns.
• Mutual funds and ETFs: These are collections of stocks or bonds. They're a way to invest in many companies at once, which can help spread out your risk.

Ethical Investing

Some people choose investments based on their personal values. This might mean investing in companies that are good for the environment or that treat their workers well. This is called ESG investing, which stands for Environmental, Social, and Governance.

Remember, investing always involves some risk. It's important to learn as much as you can and maybe ask an adult for help before you start investing your own money.

Understanding money - how it works, how to earn it, and how to make it grow - is an important skill that will help you throughout your life. By starting to learn about these topics now, you're setting yourself up for a bright financial future!