Welcome to this week’s teaching children about money post. This week it’s all about profit and loss which probably sounds a bit complex and a little unnecessary for children to know about but actually it’s really relevant to them and we had fun learning all about profit and loss together.
My aim at the end of these exercises was to help them understand the basic idea that a business needs to sell something (either a service or good) and make a profit in order to stay in business. If a business doesn’t make a profit then it’s unlikely to be able to pay it’s bills and may have to close.
From understanding this, it’s very easy to link this principle to our household finances which means they have a basic understanding of income and expenditure. They will start to learn that expenditure needs to be less than the income otherwise they’ll have a loss each month and ultimately, this will cause money problems. Obvious to some of us but it’s something a lot of adults struggle with so in my opinion, the lesson can’t be taught too early.
The first thing we did was let the kids set up a pretend restaurant for the night – Miss Frugal made menus and did the cooking and Master Frugal was the waiter (and not a good one as he kept stealing my drink). The first version of the menu had some very cheap prices on it as they wanted their pretend business to be a success and they thought that the lower prices would mean more people would come. We then sat down and talked about the fact that as a business, they would have had to have bought in the food to sell so if they were buying a pizza for £1.00 and selling it for 50p they would be losing money. A second version of the menu was made and the prices were bumped up a bit more to reflect the fact that they wanted to make a profit.
They had so much fun running the restaurant that they’ve even taking bookings from some of our friends to come round to eat there and it gave them a great understanding of making a profit. The food was nice too and as I helped with the menu, I knew that Miss Frugal could safely cook everything on there apart from a couple of things that were added on to pad it out – she planned to say she’d sold our if we ordered the salmon or the banana split!
You could do this sort of thing in lots of scenarios – from a picnic lunch to a pretend sweet shop or you could even set up a pretend car boot sale where you can be the stall holder and sell things to your child. Once you’ve agreed on a price, you can swap over and try and buy it off them and see if they can sell it back to you for more money than they paid for it.
In case you missed last week’s post all about pocket money, you can find it here.
Oh, this is wonderful! Such a creative way to learn about such an important thing.
Such a great idea. I look forward to hearing more ideas on this
Brilliant! Our school run enterprise week where they have to create a business, but they forget about all the issues and so you do need to do it often I think. This week my daughter's team learned the need to lock up your stock after their cocoa beans were stolen, and the importance of a contract, after their supplier doubled the price after they'd verbally quoted!
I'm loving your posts like this! It's such a great idea to teach kiddos the value of money x
This is such a great idea 🙂 my son keeps asking what happened to our old car so I’m trying to introduce the concept that sometimes you need to sell something to pay for something new!
Cass,
Great post! Very useful exercises about money too. I remember when my two daughters were younger we’d go into the store and they wanted a particular doll. I would ask them to count their allowance money they had and then see if they had enough to pay for the doll they wanted. My youngest one time didn’t have enough. So she put the doll she wanted at the very, very, back of the shelf and we left. About two weeks later after she had saved enough, she came back to the store and found the hidden doll and bought it. What this taught her was how to plan and save for things she really wants. Now she’s a teenager and she still applies what she learned that time. But great post, thanks for sharing.
Brilliant idea. Miss J loves taking our food orders and cooking for us in the kitchen. She's only 2 but, our eldest, often joins in. He's getting the hang of maths so adding a money element should work nicely. Thanks!
Oh, they are very lucky kids, having a mummy who dedicates so much time and energy to teach them such valuable life lessons!
That is such a great idea. I think kids learn best through experiencing it themselves so having them really "lose" and "earn" money through that restaurant is brilliant. I think my almost 9 years old would really love it.
My son is too small yet, but we chat about HOW to make him understand these things when he can. This has just opened my eyes to a great way. I am pinning this as I am sure many other Mums would like to see it.
Love this
This is a fantastic idea! Learning, while having lots of fun at the same time. I'm going to do something like this with my two, just as soon as they get a wee bit bigger. I bet yours will grow up with their heads really screwed on!
Great fun, they could apply for Junior Apprentice in a few years.
Wow, that restaurant game sounds a lot of fun, and educational too. Very good post.
Great idea and looks like they had fun. Its a good basic starter for money issues.
Thats a really good idea! And interesting they did have a strategy and thinking about selling cheap to get more customers – even if they didnt realise they would be making a loss!
I think this sounds like a really fun and practical way to explain the value of items and money to children. Very useful!