We don’t know about you, but we have been hearing about ‘the economy’ on TV, in newspapers, and at home. It is not just the United States that is having problems with ‘the economy’; it is world-wide. This is because all countries have their own economies but each is dependent on the other. Let us explain.
The economy is really how we use the products, natural resources, and services that we produce or import. People are called consumers because they use things that are made in factories or grown (like potatoes, foods, trees, etc.). Producers are the people who make, grow, or raise our food, clothing, and other things we want or need. There is a balance between what producers make and consumers use. For example: Let’s imagine that the economy was good and people felt that they didn’t need to worry about losing their jobs. People would spend money instead of saving it. They might overspend when they used credit cards. After awhile, people would stop spending money on the things they want (but don’t need) because they would already owe so much to credit card companies. This would start to affect companies that were making ‘unnecessary’ products like electronics, name-brand clothing, and things like that. The companies would have a ‘slow down’, which means they would make less of their products. Since they were making less, they wouldn’t need as many people to work in the factories, and they would lay off some employees or close down the whole factory. People would lose their jobs and have even less money to spend.
This would not only cause problems in the United States but also around the world. The United States imports products from countries around the world and exports things that we make here. If we are not buying or making as many products, then countries that depend on us are going to lose money, too. The economy of every country is important to the world economy.
The economy affects kids because if it is good, kids can find part-time jobs and their parents can provide the things that they need like food, shelter and clothing. If the economy is bad, adults need the jobs that kids would have. In 1929, the Great Depression started in the United States. Many people lost their jobs and then lost their money when the banks closed down. Men traveled across country trying to find jobs and most would take any job that was open because there weren’t many. If children were lucky enough to work, they gave all of their money to their parents to pay for things that were needed.
The economy affects everyone—even you. The best thing that kids can do is learn about money: earning, spending, saving, and giving it. In this way, you will be ready when it’s your turn to make smart, adult decisions.
Godfrey, Neale S. Kids’ Money Book. New York: Simon & Schuster, 1998.