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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.

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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

BENEFITS USED FOR?

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CREDITS

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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/en-

us/images/back-to-school-with-office-clip-art-

and-media-HA010237914.aspx>.

Purifoy, Thomas. 10 Simple Ways to Teach Your Kids

Economics. 2013. JULY 2014

<http://www.compassclassroom.com/10-simple-

ways-to-teach-your-kids-economics/>.