Macroeconomics for Kids

Over the past couple months it has become painfully clear that the U.S. economy is, at best, on shaky footing. With each passing day we are greeted with more gloomy details - unemployment rate rising, stock values tumbling, pending auto-industry failures and lay offs by the thousands.

How does one explain this recession/downturn/slowdown to kids? Do we bother at all, if we ourselves are still employed and the impact hasn't yet touched us?

A couple nights ago I broached the topic of macroeconomics with the Bear. She is turning 5 in March and while that might seem young to have such a conversation I felt it was important for her to understand what is going on in the world. She cheered for Obama alongside her Mom and Dad and to that extent she too has a vested interest in the fate of the free world, after all the future is hers not ours. What our elected leaders do today is going to play a major role in her adult life. If you don't believe that just think about what our government didn't do in Afghanistan in the 80's and follow the cause and effect trail...leading directly to the Taliban and some of our most difficult present day international dilemmas. Also factored in to the timing of me having this discussion is that my oldest brother just lost his very-well-paying job. So the downturn has touched home in more ways than just our shrinking 401(k) values. While her Uncle's new predicament opened the door I still needed a reasonable approach to the topic(s) at hand...I mean she is only 4.7 years old.

Here's the path I went down:

I told her that her uncle lost his job and that a lot of moms and dads are being sent home from work because there isn't a lot of work to be done. While there are numerous reasons, both national and international, for the rise in unemployment the example I went with is the decisions some families have to make to stop buying gourmet pita chips. Huh? The worst financial crisis since the great depression is because of fancy pita chips? Well, no, of course not but that is her favorite thing to snack on right now so I went with it. I explained that if her Uncle's family liked those same expensive chips they might have to cut them out of their shopping trips going forward as they will have less money now. That means the grocery store is making a bit less money. That means the pita chip company is selling less pita chips and may not need as many employees making pita chips. So the pita chip company sends some moms and dads home from their factories and those families have to make tough financial decisions themselves - not go out to eat and the same scenario happens as local restaurants, not go to the movies and the same things may happen at local theaters, not give as much to charity and so on and so forth...

I wanted to drive home the vicious cycle of it all and focus solely on the one aspect of the economic picture. While I kept it extremely narrow I didn't want to dumb it down or be over-silly about it. The Mrs. and I believe strongly that kids should be talked to seriously when necessary, that they are smarter than we as adults generally give them credit for and most times have a thirst for knowledge of all kinds.

It's doubtful that the Bear will be testifying in front of congress anytime soon or providing her opinion to the Wall Street Journal but at least she kinda gets how so many things in this world are interconnected. She gets, I think, that something happening somewhere else may eventually trickle down to our neighborhood/family/household.

Have you engaged in similar conversations? What did you say and how did your children take it?