KIDS ECONOMICS BASIC ECONOMIC CONCEPTS AND
TERMS FOR KIDS Volume 1
EARLY START CONSULTING FINANICAL LITERACY AND EDUCATION
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ACKNOWLEDGEMENTS I would like to give the LORD our God the praise he deserves, that without his strength, love, and faithfulness in me, I would never have been in a position to write this book. The LORD has led me to believe that all we can do in our lives is to believe in him and to plant our seeds for success in life in his name. I am a living witness that he will provide the fertile soil, necessary water, and the required sunshine for your seeds to bloom and bring you an abundance of fruits and success. Please remember this when you decided to plant your future seeds for financial success.
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LEGAL DISCLAMIER The intent of this writing is to bring an enlightened presence, awareness, and motivation to individuals who seek to comprehend the areas of basic Financial Understanding. Even though research was performed in the writing of this book, the information provided in this book is based from the author’s opinions and life experiences. The reader assumes all responsibility for the usage of the information contained in this book. It’s imperative that one should always consult a professional when making financial and investment decisions of any kind.
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CONTENTS
KIDS ECONOMIC TERMS- PG 14-39
CREDITS- PG 39
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SPENDING VERSE SAVING
So the day has come and now you are at the age when you have some of your own money. This money that you are now getting is called income. You may be getting your money in by doing jobs around the house like taking out the trash or helping your parents do small cleaning jobs in the home. This might type of income would be called allowance. You may be earning this money by doing jobs outside the home like delivering newspapers or babysitting. Another way you may be getting this money or income is by gifts sent from your family and friends, especially on your birthday and maybe Christmas.
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SPENDING VERSE SAVING
It is fantastic to have your own money. One thing however, since you have your own money, now you will have to start making choices on how to spend it. Do you like to buy things right away like candy and toys or do you like to save your money for something really nice later? Mason, who is now 8, likes to go to the candy store, while April, who is 10, likes to go to the shoe store. April already has over 20 pairs of shoes. Melissa, who is 13, likes to get her hair and nails done, while Steven, who is 11, likes to buy picture books. Steven already has over 100 books. 6 | Page
SPENDING VERSE SAVING
There may be times in your life that the things your want or need cost more than the amount of money you currently have. An example; Steven wanted to buy a new picture book of Wild Birds. The book cost $25 dollars. Steven only had $10 dollars. So if Steven wants to buy the new picture book, he would have to save enough money so he could buy it in the future. The question is; how do you know when to save and spend your money. Is it possible to do both? The answer is Yes! That is the way to managing your money wisely. If you, as a young man or woman, learn this skill now, you will be better off when you become an adult.
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NEEDS VERSES WANTS Wyatt, who is a 15, loves to save his money for something very expensive. It must also be something that he will use almost every day. Roscoe, who is 8,
spends his money
as soon as he gets it.
Roscoe spends
at least $2 dollars a
week at the
candy store. Roscoe also save some of his money for thing he might want in the future, like a new basketball or video game. Gertrude, who is 10, likes planning for the future. She saves her money in a Bank for things she might need when she becomes an adult. Gertrude, would love to one day have a car.
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NEEDS VERSES WANTS Saving means putting back a little money each time you get some. Example; let’s say you got $10 dollars a week and save $5 dollars of it each week. After four weeks, you would have $20 dollars. Imagine if you saved for 10 weeks, you would have $50 dollars. It is important to remember that there will always be times when you have to spend your money, so do not get worried if you do. Usually, these are things you need right away like food, school supplies, or even batteries for one of your toys.
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NEEDS VERSES WANTS There will be other times that you just want to buy something you want, like going to the movies or a new video game. The only way for you to really
know when to
save and spend is to
know the
basics of needs and
wants.
Understanding Needs and Wants can very confusing. We all have heard people say,� I need to get the video game or I got to get those new shoes or sneakers. You may have even said something like this in the past. So, what happens if you do not get the video game or new pair shoes or sneakers?
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NEEDS VERSES WANTS Will you suffer if you don’t get them? I don’t think so! Your needs are things that you cannot live without like a place to live, heat in the winter, cool in the summer, clothes to cover your body, and transportation to get you from one place to another. Your wants are things that you can do without, but you would love to have. Some examples are Candy, Video Games, Basketballs, Footballs, a new Xbox, or new designer clothes. When trying to understand needs and wants, first ask yourself, what do I really need in order to get ready for the day.
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NEEDS VERSES WANTS You might say I need my soap, a toothbrush, shampoo, comb, and a towel. What do I really need as far as clothes? You might say I need shoes, pants, a shirt, a pair of socks, and a hat. What do I need for transportation to school? You might say I need my bus fair or a bike. You might need things to help you with your classes like pencils, paper, a ruler, markers, and scissors. More things to help you with understanding your needs and wants are questions like this.
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NEEDS VERSES WANTS Will the things I want help me be better at what I am trying to do in my life? Will these things I want help me get their faster? Will these things I want help me do better? The trick is to focus on what is necessary for your everyday lifestyle. If you are not sure what these are, have your parents or a trusted adult help you. Once you have your list it is time for you to begin to understand some basic Economic concepts.
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BANKS A bank is a place where people keep their money. There are two types of Banks. One type of bank is called Commercial Bank and the other type of bank is called Investment bank. Commercial Banks are the most used banks. They provide people with savings accounts, credit cards, home loans, and car loans. Investment Banks are banks that give money to business instead of people.
QUESTION: WHAT ARE TWO TYPES OF BANKS?
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BONDS Bonds are written promises to pay back borrowed money with interest at a later date. Governments and Businesses borrow money from people, so they can run their businesses better. These Governments or businesses have to pay back this money to the people by a certain date in the future. Here is an example; a business needs to raise money to build a new factory.
QUESTION: WHAT ARE BONDS?
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BONDS The business decides to borrower money from people and pays it back to them within ten years. The company would then create Bonds and give them to the people for their money. Every year the people keep the bond, they will earn additional money, which is called interest. When the ten
years up, the people
will receive back the money that they gave in the beginning.
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CHECKING ACCOUNTS This a special place at a bank where people keep their money. People can then write checks that will tell the bank how much to money to spend and where to spend it. An example; Your Grandfather gives you a check for $20 because you received high grades in school. You would bring the check to your bank and your bank would take the $20 from your Grandfather’s account and give it to you.
QUESTION: WHAT IS A CHECKING ACCOUNT?
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Credit is a person’s ability to borrow money. An example; a person may borrow money from a bank to buy a new home, boat, or car. Another example of credit is Credit Cards. Credit Card Companies or banks agree to lend people money over time. This money can be spent using a Credit Card which is provided to the person by the Credit Card Company or Bank.
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The person using this Credit Card must pay a user fee which is called interest when using the Credit Card. A person who pays their bills on time is considered to have good credit. A person who does not pay their bills will have bad credit.
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Debt is money that is owed to someone or something. Example; if a person borrows $100 to purchase a pair of shoes, the person would have $100 debt. There are two types of debt. The first is National Debt. This is the amount of money that the United States of America owes its citizens, companies, and other governments. The second is Personal Debt. This is the amount that a person owes others, companies, or governments.
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ECONOMIC DEPRESSION This is a period of time when the economy is without money and many people cannot find jobs. During a depression, people spend less and businesses spend less making it harder to live our lives. Periods of depression can last for many years.
QUESTION: HOW LONG CAN A ECONOMC DEPRESSION LAST?
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ECONOMY The Economy is the way country takes care of its money and resources to make or buy goods and services like food, gas, clothes, computers, and many other things. These resources can be things like workers, land, or water. Services that might be purchased within the economy are teachers, transportation, or medical services. QUESTION: WHAT ARE RESOURCES?
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ECONOMY The United States of America has a Free Economy system which means the people have the right to freely buy and sell goods and services. The cost of goods and services are
set by the needs and wants of the people. The more people want a good or service, the more the item is going to cost. Economies do well when people have a high
need or want for goods and services.
QUESTION: WHO SETS THE COST FOR GOODS AND SERVICES
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The Federal Reserve is the United States of America’s main bank. This bank is only used by the federal government and other larger banks. The job of the Federal Reserve is to control the amount of money put into the economy. The Federal Reserve also controls interest rates and makes rules for the smaller banks to follow when giving money to others.
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Foreclosure is what happens when a person loses their home because they could not pay back their debt. People borrow money from bank to buy their homes and they are expected to pay this money back to the bank over time. If the person does not pay back the money they borrowed over time, the house will go into foreclosure and the bank will become the owner of the home.
?
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INTEREST Interest is a fee for using someone else’s money. Example; if a person borrows money from a bank to buy a home, they would have to pay back the amount of money they borrowed plus interest. However, if a person would put money into the bank, the person would receive interest on their money because the bank is using it. The bank is allowed to use a person’s money for other things like loaning money to other people or businesses. QUESTION: WHAT IS INTEREST?
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An investment is anything that is bought with the hope that it will be worth more in the future. An Example of this would be savings bonds which are guaranteed by the United States government to increase in value. Additional investments like stocks or bonds can increase in value, however, they are not guaranteed. This meaning that these types of investments could lose their value overtime.
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LOANS A loan is money that a person borrows from another person or bank. People take loans to make large purchases like homes, cars, or home repairs. Business’s many times take loans to increase their business and sales. Banks like to loan money to people or businesses so they can earn user fee or interest overtime. This process of earning interest is how banks make money for themselves. QUESTION: HOW DO BANKS MAKE MONEY?
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A mortgage is money a person borrows from a bank, which is used to buy a home. It is not easy to get a mortgage loan. A person would have to work hard and save some money for a down payment and a person would have to have good credit. Many mortgage loans have payback periods up and past 30 years. Once the mortgage is paid back to the bank, the person borrowing the money would own the home.
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An Economic recession is a slowing of the production involving goods and services within the economy. This slowing of production can lead to loss of jobs within the economy making it harder for people to live their lives.
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POLICIES AND REGULATIONS The United States Government creates policies and regulations for the banks to ensure proper lending and customer service is performed. There are many policies and regulations like quarterly reporting and yearly reporting of business performance to the government. The government has many different areas involved in the review of this reporting for policy violations. The purpose of these regulations is to ensure the Banks perform fairly when consumers want to borrow money.
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SAVINGS ACCOUNTS This type of bank account is where money is held with the chance to earn interest over a period of time. This type of account allows a person to put or take money from the account at any time. This interest or user fee is given to the person based on the amount of money put into the account over a period of time.
QUESTION: DO SAVINGS ACCOUNTS EARN INTEREST?
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Stock is the ownership of a part of a business. These stocks are sold by the businesses to raise money for their future goals. When a person buys a stock, they will own a small part of the business that sold the stock. The price of the stock can go up or down based on how well the business is selling its goods or services. When stock prices go up, stockholders can make money. When stock prices go down, stockholders could lose money.
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STOCK MARKET A Stock Market is a location where stocks and bonds are sold
and bought.
The New York
Exchange is
the largest stock
market in the
United States of America. There are other Stock markets too, like the S&P 500 and NASDAQ. There are also Global Stock markets in Japan, Germany, London, and China. If a person wants to buy or sell a stock or bond, they can either go to their stock exchange or find a stock broker. A stock broker is a person that helps customers make their stock buying or selling choices.
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TAX Taxes are the cost of having a government. There are many different types of taxes like Federal Income Tax, State Tax, and Local Tax. Each one of these tax pays for an area that serves all of the people. Every year, all workers pay a portion of their earned money to the government from where they live. This tax is used to improve our general living conditions like schools, roads, food, security, and much more. Many people do not like paying taxes or have problems with the tax being too high. QUESTION: WHAT ARE TAXES USED FOR?
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TREASURY DEPARTMENT This is a part of the United States Government that handles all of the country’s money. This department gets a budget from Congress and the President telling them how much money will be spent over the next four years in America. The Treasury Department then decides on how much to tax the United States citizen so that amount of money can be attained. The Treasury department will also sell Government Bonds to people to help attain the money for the budget.
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TREASURY DEPARTMENT Once this money is attained, the Treasury department will regulate the money to ensure it is spent correctly. The Treasury Department has over twelve areas or sections. These departments range in duties from collecting taxes to printing more money for the economy.
QUESTION: DOES THE TREASURY DEPARTMENT SELL BONDS?
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UNEMPLOYMENT RATE The unemployment rate is a number that shows how many people are not working during a certain period of time. If this rate is high, this means that many people are out of work and could mean that the economy is very weak.
QUESTION: WHEN THE UNEMPLOYMENT RATE IS HIGH, IT MEANS THE ECONOMY IS WHAT?
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UNEMPLOYMENT BENEFITS If a person has not been working for over a year, they can apply for financial assistance from the government. This assistance is considered Unemployment Benefits. This assistance is meant to help people live until they are able to find a new job. The amount of assistance one receives is based on the person’s prior income level or wage. This assistance is paid by the collection of taxes by the Treasury Department. QUESTION: WHAT ARE THESE
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CREDITS Kellaher, Karen. SCHOLASTIC.COM. 2014. JULY 2014 <http://www.scholastic.com/browse/article.jsp?i d=3750579>. Kids, Social Studies for. Want vs. Need: Basic Economics . 2014. JULY 2014 <http://www.socialstudiesforkids.com/articles/ec onomics/wantsandneeds1.htm>. MICROSOFT. CLIP ART. 2014. JULY 2014 <http://office.microsoft.com/enus/images/back-to-school-with-office-clip-artand-media-HA010237914.aspx>. Purifoy, Thomas. 10 Simple Ways to Teach Your Kids Economics. 2013. JULY 2014 <http://www.compassclassroom.com/10-simpleways-to-teach-your-kids-economics/>.
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