What is Inflation? A Simple Explanation for Kids, Teens and Beginners

What is Inflation? A Simple Explanation for Beginners

Introduction to Inflation for Kids and Teens

This video explains the concept of inflation in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about it, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

What is Inflation - A Simple Explanation for Kids Teens and Beginners
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Suitable for students from grade levels:

  • Kindergarten
  • Elementary School
  • Middle School
  • High School

The topics covered are:

Howdy Wall St. Willy!

I heard that some country had a really high inflation rate. But…

What is inflation anyway?

Inflation is the increase in the prices of goods and services over time.

Well, how does that affect us?

Because of inflation the value of the dollar, also called its purchasing power, reduces every year. So, $100 five years from now cannot buy the same amount of stuff it can buy today.

This means that the return that you get from any investment is at least more than the inflation rate otherwise your money would actually lose its value over time.

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So, inflation is bad, right?

A high or very high inflation rate called hyperinflation isn’t good because that usually means the government is spending a lot more money than it is earning.

But a lower or moderate inflation is good because it means there is a reasonable demand for the goods and services in the economy.

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Deflation: The opposite of inflation

Well, can the prices of goods and services go down over time instead of going up?

Inflation Rate and Inflation for Kids Teens and Beginners
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Yes, at time the inflation can be negative and prices can go down. That’s called deflation.

If it continues for a long period of time, it is a sign of a weak economy because it indicates a lack of demand for the goods and services, which means that less than expected or less than needed people want to buy the products and services that that country provides.

Who decides the rate of inflation?

The inflation rate is decided by the markets depending on the economic factors.

Rate of Inflation for Kids Teens and Beginners
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But usually a country’s central bank or a monetary authority like the Federal Reserve in the US decides policies to change the rate of inflation over time.

What’s the current rate of inflation?

The rate of inflation at the end of 2018 is around 2.5% in the US.

Thank you very much for telling me about inflation, Wall St. Willy.

You are welcome, Sooper Cooper. Remember, Finance is Your Friend!

Video Featured in the Below Financial Literacy Course for Kids & Teens

Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens

Podcast: What is Inflation?

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