How Inflation & Prices Work: Helping Kids Understand Why Things Cost More Over Time (Ages 8-12)

Why Talk About Inflation?

When I reviewed our last article with my 11-year-old (I always vet content through at least one of my kids), one of her reflections stood out. She said, “You can just save and not lose money.”

It was a thoughtful comment and one that captures a common investor mindset: the instinct to avoid uncertainty. However, while saving feels secure, it does not generally protect against inflation, and it leads to more advanced topics about how investors use strategies such as diversification to manage risk and help their money grow over time.

In this article, we focus on inflation, in easy terms. Our next article will build on this foundation by introducing volatility, diversification, and other ways investors manage risk, key ideas that help shift from short-term saving to long-term financial thinking.

Explaining Inflation Simply

Inflation means prices for everyday things (like toys, school or art supplies, activities, presents, or groceries) go up over time.

That happens when:

It costs more to make or ship products
For example, if the price of the materials like wood, plastic or paper increases, or if gas prices rise and vehicles that ship the products cost more to run, the final product in the store becomes more expensive. Companies often pass those extra costs on to buyers.
There’s more demand than supply
This means lots of people want to buy the same thing, but there isn’t enough of it to go around. Like when everyone wants the newest video game or the same special-edition toy. When something is hard to find, stores often raise the price because they know people are still willing to pay for it. They want to make more money.
The value of money slowly changes
Over time, the amount that money can buy, called its "purchasing power" can go down. When more money is circulating in the economy, meaning people are earning, spending, and borrowing more, businesses often raise prices because there’s more demand for goods and services. This causes overall prices across many things, not just one item, to increase gradually.

Putting it together: when the cost to produce goods and services rises, demand for goods and services exceeds (or is greater than) supply, or the value of money decreases, prices increase. This overall rise in prices over time is known as inflation.

Children's Books

Pair your family discussion with these great reads:

What Is Inflation? by Kelly Lee. Charlie learns about rising prices after a storm affects his bakery.
Prices! Prices! Prices!: Why They Go Up and Down by David A. Adler. Bright illustrations make supply and demand easy to understand.

Making It Real: Everyday Examples

Stories and books help immensely in our view to explain inflation, but the best lessons can often come from everyday life. Once kids understand that prices rise over time, you can help them see it for themselves.

Try a simple example: last year, a book or a set of pens at the school book fair cost $1. This year, it’s $1.10. The product hasn’t changed, but the price has. That small difference represents inflation in action: the same money now buys a little less.

Encourage your child to notice similar changes around them.

Additional items:

Search for toy prices from when you were a kid and compare them with today’s versions.
Visit Statistics Canada’s Consumer Price Index (CPI) to see how prices change over time. (Great for older learners)

When kids connect the idea of inflation to things they can observe, it becomes real, they learn that money is also for thinking ahead. It’s the key to saving smarter, investing wisely, and informed financial decisions as they grow.

A Note for Parents

Every child learns differently, and that’s completely okay. You don’t need to push. One of the best things we’ve done over the years is to simply populate our kids bookshelves and leave books out around the house.

The more access kids have, the more naturally they’ll explore. Financial literacy doesn’t have to feel like homework.

Check out our growing book recommendations to make learning about money an easy, everyday part of your life, too. We’re also partnering with some investment firms to bring more financial literacy books into local cities and libraries as a cost-effective, accessible option for all families. Stay tuned on these initiatives!

Finally, Consistency matters. As a core philosophy, we aim to be mindful of how financial terms are used, because the same word can mean different things depending on the context. Take share, shareholder, and stock, for example. We use these terms intentionally and define them clearly so kids can start recognizing the language of finance as it’s used in real life. Jargon has always been a personal pet peeve, so we are likely to tackle it in a future article. We hope that our articles and resources continue to offer value!

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Every family’s financial situation is unique, and we encourage readers to conduct independent research and choose what best fits their own needs.