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What to Teach Your Kids About the Economy

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Other Economic Forces

Plenty of other technical terminology is bantered about these days when it comes to the economy. News radio reports may talk about economic forces every 10 or 20 minutes. Here are just some of the more common things your child may be exposed to and may want to know more about.

Money ABCs

The Dow is shorthand for the Dow Jones Industrial Average (DJIA), a composite of the prices of 30 stocks. The Dow is an index used to measure whether the stock market as a whole is up or down. The Dow is the most well-known average because it includes big companies that everybody knows, such as IBM, GM, and Kodak. But many other averages are around as well.

  • Unemployment figures. Each month, the news reports on how many people are out of work and looking for jobs. You also hear reports about corporate layoffs and job creations. Unemployment figures can help explain to a 10-year old why his mother is out of a job, like so many other people. It's also useful for a job-hunting teenager to know whether unemployment is high or low. When she's looking for a summer job, low unemployment numbers means that job openings are abundant. If the unemployment rate is high, however, she should anticipate a lengthier job search and may have to settle for lower wages. Today, despite corporate layoffs, the economy continues to experience job creation, translating into more job openings than ever.
  • Interest rates. You can't listen to a news report without hearing talk about interest rates, whether they're up or down. Children aren't interested in these rates because they primarily help you, the parent, in instances such as getting a lower-rate mortgage on your home. But younger children should know about interest rates because these rates affect how they save their money and what they can expect to earn. Older children with bank accounts of their own will see how changes in interest rates affect what they earn on their savings. Teenagers with credit cards also may feel the effects of changing interest rates if they're paying finance charges on unpaid credit card balances.
  • The Dow. As with interest rates, daily reports on where the Dow is at can't be avoided. Again, knowing about this benchmark can spark your child's interest in investing in the stock market. Middle school- and high school-age kids might play at investments by tracking real stocks without putting in any real money. Some may even become interested in becoming actual investors.

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Excerpted from The Complete Idiot's Guide to Money-Smart Kids © 1999 by Barbara Weltman. All rights reserved including the right of reproduction in whole or in part in any form. Used by arrangement with Alpha Books, a member of Penguin Group (USA) Inc.

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