A Socratic Money Lesson For 2nd Graders

I’m sharing the money lesson I did with a pair of 2nd graders on my rotation day with the pod. No worksheets involved. I just used the Socratic method to ask questions and let them develop an understanding on their own.

The concepts:

  • hourly income
  • budgets

Techniques applied:

  • addition and multiplication
  • estimating
  • brainstorming

Materials needed:

  • Poker chips or play money
  • Pencil and paper (we actually used markers and small dry-erase boards)


“Let’s suppose you make $25 per hour.

Pick something you want to buy so you have a savings goal.”

[In our example, they answered gumball machine, so I set the price at $1,000]

Question 1:  How long would it take you to save up for it?

What we are looking for in the answers:

    • How many hours it would take to save up $1,000?
    • How many hours you might work per week? (Expect bad estimates. I found myself asking them what time their parents go to and from work)
    • How the time it takes to save varies with how many hours a week you work.
    • Extend discussion to how much you would make in 1 year.

If you were a grown up you would need to pay for many things. These are known as necessities

Question 2:  Can you make a list of necessities?

What we are looking for in the answers:

We want them to identify categories. I had them create a list on their dry-erase boards. Here’s the ones we settled on:

      1. Food/Drink
      2. Shelter
      3. Transportation
      4. Clothes
      5. Utilities/Energy (including gas for the car)
      6. Hygiene(teeth, hair, soap)
      7. Entertainment/Fun
      8. Furniture/phone/computer (things you buy every few years…durable goods)
      9. Then savings!

Question 3: Create a monthly budget per category item.

What we are looking for in the answers:

In our lesson I had the kids estimate their monthly income and had them count out that much money worth of poker chips. You could use play money from Monopoly just as easily. I then had them estimate the amount of money they would need to spend on each category. They have now learned the concept of budget! Be ready to spend a lot of time here helping them walk through reasonable estimates. When one of the boys said $100 a month for food I explained that you could not even by 1 Happy Meal a day for that amount.

I had the kids stack of the appropriate amount of poker chips on each category.

It is interesting so see how much money the kids allocate to each category once reasonable ranges are established. These 2 boys had a big difference in their fun budgets!

Question 4: How long does it take to save up for that $1,000 gumball machine (or whatever they want to save for)?

What we are looking for in the answers:

Bound by the need to pay for necessities, the kids will discover that they can only make extra discretionary purchases if they amass enough savings. Compared to not having obligations, they should notice that it takes much longer to save up for that gumball machine.

Question 5: How can you get the gumball machine faster?

We want to establish the importance of this category. Adults understand it is a stock variable that changes with monthly flows. We want the kids to establish a link between savings and the things they want to buy. What can you do to save faster?

What we are looking for in the answers:

    1. Work more hours
    2. Spend less on budgeted items
    3. Earn more per hour

Going Further

This is where we stopped but next time this is my plan to continue.

Beyond Labor

This is where we will talk about creating a business. We had already started the discussion when the boys realized they could buy a gumball machine, stock it with candy, place it in Target and pay the machine off. Rinse and repeat. This got their little gears turning!

Here is some ideas I have for exploring:

Basic Accounting

  • Revenue
  • Fixed Costs
  • Variable Costs (COGs)
  • Profit

2 kinds of businesses: service and product

Service: Money-for-time businesses. For example a dentist or dogwalker or haircutter or coach. Earnings potential constrained by hours.

Product: Writing a book, or song (I want to talk about writing credit vs performing credit vs lyrics credit for songs. To make it fun I will look up some examples of a songs they like –Hamilton’s My Shot, Lil Nas X’s Old Town Road, or Bruno Mars’ Uptown Funk)

Brainstorming businesses

  •  Brain dump of business ideas
  • Labeling business examples as type 1 or type 2

Application: Lemonade Stand example

  • Working at a lemonade stand is hourly labor and similar to a service business.
  • Owning a lemonade stand is product business.

Demonstrating the difference in risk: the upside and downside of ownership

Contrast the p/l after an hour’s work at a lemonade stand for the worker vs the owner on a

      • Hot day [above expected revenue]
      • Cold day [below expected revenue]
      • An AQI 500 day where people stay indoors (hey these are CA kids!) [no revenue]

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