Inflation and math go hand in hand. That’s important to note when describing inflation to your child. Although we often say we feel the effects of inflation, it’s not something that’s measured by feelings. It’s measured with math.
The U.S. Bureau of Labor Statistics (BLS) measures inflation through the Consumer Price Index (CPI). While the specifics of the CPI measurement are quite involved, you can explain CPI to your child by comparing it to a shopping cart.
CPI measures the cost of everything in a shopping cart compared to what the exact same cart would have cost last month. And the BLS puts a lot in that cart. It includes groceries, your power bill, your rent, your medical costs, and nearly everything else you may have bought in the last month—from a meal out to a trip to the bowling alley.
However, the exact makeup of the cart is less important than your child’s understanding that the cart contains a wide variety of items and that CPI measures the total cost of everything in the cart. From month to month, the prices on some items are likely to rise much faster than the prices on others, but CPI isn’t designed to measure price changes for one or two items. It’s designed to tell us if prices, when averaged as a whole, are going up. If they are, we’re experiencing inflation.