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Teach your kids opportunity cost

Posted by Children Story Time admin, 9 minutes read

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Teach your kids opportunity cost to promote growth and learning…


Part of being a parent is teaching your kids about choices, weighing options, and consequences. You can teach your kids opportunity cost to help them make good decisions and understand options in life. 

Once your kid understands opportunity cost, they can make balanced calculated decisions for everything from financial matters, to social matters, to other issues a young person may run into. Discover here how you can teach your elementary, middle, or high school kid about opportunity cost and how it relates to them. 


What is the opportunity cost?

In order to teach your kids opportunity cost, you need to first really understand what it is. Opportunity cost relates to choosing between two things and the value (or the difference) of what is chosen over what is not chosen. When you are faced with a decision between two options, by nature, you choose one which therefore refuses the other. Opportunity cost of that choice is the cost or value of the alternative not chosen. 


Opportunity cost is not necessarily consequences

It is key to understand that opportunity cost is not the same as consequences. Consequences happen after you’ve calculated opportunity cost and made the choice. For example, let’s say a business is choosing between investing a sum of money into either automating jobs or providing additional technical training to existing employees. To put it in a monetary way, the expected return on investment for the automation is 22%, and the expected return on investment for the additional training is 27%. The opportunity cost of choosing automation over training is 27% minus 22%, so 5%. A consequence of that choice could be people losing their jobs. 


Logic of opportunity cost in everyday life

Helping your kids understand opportunity cost and how this logic can help them across the board is key. This concept doesn’t only relate to economic and financial matters; the logic can be used to make other choices in their day-to-day lives. It is important to remember that opportunity cost doesn’t always have to be numerical or monetary.  Another important thing to stress when you teach your kids opportunity cost is that value can sometimes be subjective. Being subjective means that one’s value on something, even if you’ve given it a monetary number, can be different from one person to the next. For example, getting a certain grade on a test is valued differently from kid to kid, it is subjective.


Teaching your kid 

We will start by teaching them the overall ideas involved in this. A choice needs to be made, and something given up. Narrow all your choices down to the two best options. What is the expected value of each alternative? Can we give the options a monetary value? Who will choose, and who will be affected by the consequences? Now that we have established the details, let’s narrow down the best way for your kid to understand.


Recognizing your kid’s learning style

When teaching your child about opportunity cost, it is important to utilize the type of learning they relate to best. This means teaching them in the same way they typically learn best in any other subject. Some kids are hands-on learners, while others do best when looking at pictures or having words written out for them.

Having a good understanding of how your child learns best is going to make teaching them about such a mature topic that much easier. Approaching such concepts is difficult enough but to further confuse them by presenting them in a perplexing manner will just make them uninterested and frustrated.


Visual/Spatial learners

Does your child learn best from images or spatial learning? If so, you can teach your kids opportunity cost by showing them what that physically looks like. Let us start with a variety of snack packs of chips and place two of them on the table. Let’s have Doritos Nacho Cheese and Cheetos as the options. Have your kid choose between the two options.


The one they choose is the chosen option and the one they did not is the opportunity cost. If they chose Doritos, they need to understand that they will not have access to the Cheetos, and that is the cost for their choice. Now let’s put all 7 varieties from the pack on the table and see how the same logic applies. Have your kid physically narrow down their choices to two, tossing the unchosen chips back into the box; none of those rejected chips equate into opportunity cost. Presumably your child is now choosing between two chips they like a lot, but you’ve made it clear they can only have one. The chips not chosen out of the two become the opportunity cost.  



Maybe your kid likes equations and understands math better, they prefer systems to images. If so, you could phrase it like a math equation. Opportunity cost = Return on the best option – return on the chosen option. It is the difference between the two choices. This equation works especially when you’ve assigned a monetary value to each option. You could bring this into real life when you go to order at the fast food restaurant. The double cheeseburger meal with fries and a drink is $9.00, and the chicken sandwich meal with fries and drink is $8.00. Opportunity cost, the difference between the two, in choosing the cheeseburger meal is $1.00. 



Some kids learn best when they talk through and discuss an issue without the aid of visuals or equations. Ideally, you’ve been discussing each part out loud together, but you can really have the concept of opportunity cost sink in by discussing somewhat more complex examples. Let’s say for example your middle school kid is learning about the ancient Egyptian civilization in their history class. Once your youngster understands the basics of the opportunity cost equation, you can tell them how it relates to history in order to really help your verbal learner understand. When they were building the pyramids in Egypt, they could have chosen to use their precious resources like stone to build the tombs and pyramids of Egypt or they could have chosen to build stone houses for all of their citizens. Although there is no monetary value, this example helps your kid understand about deciding between the two; what choice was made, what was the cost of the decision, what benefits? 


Teenagers and opportunity cost

Teenagers tend to have very social lives and value friendships and freedom. A great way to teach them about opportunity cost is to use a relatable example about driving their car, seeing their friends, and paying for gas. You can look at this example in two ways, the first of which is without monetary value. Your teen has two options, go to the movies with friend A or go to the coffee shop with friend B. They have to choose one, and they can weigh the options based on which way they feel and what they would prefer to do. Let’s say they choose the movies; they need to understand that the opportunity cost of this is the option not chosen, the opportunity cost is not seeing friend B. 

Using the same example, you could phrase the choice in a matter of money and gas. Let’s say the movie theater is 10 miles away, using up a considerable amount of their gas. Also, the movie is going to cost them $8.00. On the other hand, the coffee shop is 2 miles away and the beverages will only cost them $4.00.

The point here is for them to understand that opportunity cost and making the choice between the two can be related to money and costs, not only an emotional choice. 


Kindergarteners and Opportunity Cost

Your child is never too young to learn about the importance of opportunity costs and how making important financial decisions can eventually be beneficial in their future. Some experts believe that kids are able to comprehend this concept from as young as age 5. (Providing age-appropriate examples of course.).  As an example, you take your five-year-old to your local department store to spend the money that they got for their birthday. They have $25 in total to spend and have two different items picked out. One item is a superhero figurine they really wanted for $10, and the second item is a complete art set for $20. Many parents will feel compelled to offer their kids the extra $5 so they have enough for both options, but you shouldn’t. You can use this opportunity as a learning experience and help them choose between the two items by listing the pros and cons of each. The superhero figure will be a lot of fun to play with but can get boring after a while and doesn’t provide many different opportunities to play. On the other hand, the art set is full of crayons, colored pencils, and markers, providing different items to use on a bunch of different projects and in many ways. You can take it a step further and remind them that with the art set they will also have just enough money left over to also pick up a pack of construction paper, teaching them to budget and to think outside the box.


Let Your Kids Get Involved with Everyday Financial Decisions

No matter how old your children are, it can be extremely beneficial to keep them in the loop regarding the financial decisions that go on in the house. Not only is this a great way to help them make hard decisions when it comes to budgeting and having to let go of one option in order to afford another, but it will also help them learn to appreciate the things they have a little bit more. Many parents prefer to keep their kids in the dark when it comes to paying the bills, especially when money is tight because they don’t want them to worry. In reality, this is an ideal time to teach your children how to handle the different tough financial situations that can pop up in anyone’s life.  So, the next time you decide to go over your weekly or monthly budget, call the kids into the room and turn it into a family task. Create a calendar including when bills are due and how much money is available to make each payment. You can even color-code the calendar with payments that are a must, such as a mortgage, the electric bill, and the vehicle payments, and items that are not as important such as Netflix and pizza night. Let the kids decide which of the “extras” to eliminate this paycheck and guide them to making the best choices.


What To Do When Your Child Can’t Let Go of Either Option?

Learning opportunity costs at such a young age can be very tough, and it isn’t going to come easily. It is imperative to stay positive and keep your patients. If your kid has trouble choosing between two items, the best course of action is to encourage them to leave them both and come back once they have given it some thought. Making a decision on the spot can be troubling for anyone, getting your child to take a step back and look at the bigger picture is going to set them up for a successful financial future. At first, helping your kids weigh out the options of one item vs. the other is going to be crucial. They are not equipped with the ability to make logical decisions that are going to make better financial sense, especially if that means forgoing something that is more satisfying at the moment. After setting them up with the tools needed to make good decisions, you can leave your kids to tackle these types of situations on their own, giving them space, and letting them feel responsible for their own choices, even if that means making the wrong ones. 


The more times your child makes a mistake or picks the wrong option, the more they are going to learn and the more skills they are going to build in order to make decisions in the future when their choices are a lot more critical.


Will opportunity cost logic work? 

If the kids have been taught about opportunity cost in a way they understand, they can surely use the logic in their everyday lives. Understanding that the logic of opportunity cost can help them weigh decisions, see outcomes, and realize consequences will show them that this logic is versatile and helpful. 


Summing Things Up

Cost opportunity isn’t a skill many parents think about teaching their children, especially when they are young. However, this is an extremely important part of life and the tools you teach your kids while the financial decisions they make aren’t that significant can set them up for a more successful future.


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Teaching your kids about opportunity cost will help them with finances and everyday life



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