Explaining Economics? – Q&A May-June 2010

HEM’s Questions & Answers – May-June 2010

“The financial meltdown has caused my daughter (11) to panic and hoard every penny but caused my son (14) to figure there’s no use saving and just spend anything he gets. Any time I explain economics it makes it worse. Any ideas?” – unemployed in Pittsburgh

Your responses must meet our deadline of March 15th, 2010. Please recognize that your submission may be edited for length or clarity. Indicate how you prefer your question or answer signed.

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2 Responses to Explaining Economics? – Q&A May-June 2010

  1. Eeyore on February 21, 2010 at 6:21 pm

    I think this is a golden opportunity to look into various historical financial crises and to learn about handling money. The Great Depression is an obvious starting point, I really enjoyed Studs Terkel’s book “Hard Times”. It’s a collection of stories, vignettes, about people who lived through The Great Depression and how they coped. There are tales of heartbreak and of great compassion and courage. They’re short little bursts of real history told by real people. I would imagine your local library would have access to a copy of this book.

    There’s nothing inherently wrong with either your daughter’s or your son’s approach to handling money, as long as both are happy to live with the consequences of their decisions. For your daughter, it may mean missing out on things she would normally treat herself to, but that can be character building (and as a frugal squirrel myself, I identify with her need to save for a rainy day, I think it’s just common sense). For your son, it may mean having no money when he really needs some because he wasn’t thinking ahead and saving. Too bad. He’ll have to miss out too – again, it’s character building. He’ll learn eventually that having some put away “just in case” is a sound strategy.

    Finally – the best way of learning about the value of money is working for it. I don’t know your personal set up, but if you are just handing over pocket money each week, then maybe consider giving your children a lesson in “real” economics. Let them work for their money, let them earn it, and gradually they’ll learn how to manage it carefully.

  2. Marion McEwen on May 12, 2010 at 11:43 pm

    Generally young people understand that money buys things and most understand that they must earn money. As Eeyore above said they learn it’s value by working for it. For a fun read that pre-teens and teenagers would enjoy look for The Incredible Bread Machine by R. W. Grant, not Susan Brown. It is out of print but you can find it in libraries and at Amazon.com. For a more scholarly point of view see Henry Hazlitt’s Economics in One Lesson also at Amazon, cheap. I also like F. A. Hayek’s the Road to Serfdom. All these books a short relatively easy reads and discuss basic principles of economics.