Lesson plan · Money Fundamentals · Lesson 8
Inflation
Why prices rise, what it does to the value of your money, and how to think in "real" terms.
- 45 minutes
- Grades 9–12
- Beginner
- Activity: pairs
Objectives
Students will be able to:
- Explain inflation and how it reduces purchasing power
- Estimate a real return by subtracting inflation
- Calculate how a price changes over time at a steady inflation rate
Materials
- Slide deck and a projector
- Worksheet (one per student)
- The lesson's interactive (projected, or on student devices)
- Exit ticket slips (bottom of the worksheet)
Standards
- National Standards for Personal Financial Education (2021)
- SavingInvesting
- Texas TEKS §113.76 Personal Financial Literacy and Economics
- (2) The student understands that macroeconomic issues and policies have an impact on personal finance.
- (8) The student understands the importance of saving and investing in creating wealth and building assets.
Topic-level alignment by FLC. How we map standards
Key vocabulary
- Real return
- What your money earns after accounting for inflation. A rough estimate: your interest rate minus the inflation rate.
Background reading
The official sources this lesson is based on.
45-minute agenda
0–5 min
Warm-up
Post: “Name something that costs more now than it did a few years ago. Why do you think the price went up?”
5–12 min
Direct instruction
Present the lesson slides. Make sure students leave with these points:
- Inflation = rising prices = each dollar buys less.
- Real return ≈ your return minus inflation.
- The Federal Reserve aims for about 2% inflation over the long run.
- Long-term money usually needs to grow faster than inflation.
Use the “See it” slide (What $100 buys with 3% yearly inflation) to make the idea visual.
12–17 min
Worked example
Walk through “When a raise is really a pay cut” on the slides. Pause before the result and ask students to predict it.
17–22 min
Live demo
Project inflation calculator from the slides. Change one input at a time and have students call out what they think will happen.
22–32 min
Price Time Machine
Format: pairs · 10 minutes
- Pairs pick three prices: a $5 lunch, a $60 video game, and $1,200 monthly rent.
- Using the inflation calculator at a hypothetical 3% a year, they find each price after 10 and 30 years.
- They find what $100 kept as cash would buy after 20 years.
- Discuss: what does this mean for money you won't need for decades?
What to look for: At 3%: lunch ≈ $6.72 (10 yrs), $12.14 (30 yrs); game ≈ $81, $146; rent ≈ $1,613, $2,913. $100 in cash buys about $55 of today's goods after 20 years.
32–37 min
Check for understanding
Use the question slides — or run them as a Four Corners game. Questions:
- What happened to your money's purchasing power?
- In real terms, what happened to your pay?
- Keeping a large amount of cash at home for decades protects it from losing value.
37–42 min
Discussion
- Ask a parent or grandparent what something cost when they were your age. How much has it changed?
- Who is hurt most by high inflation? Who might not be hurt as much?
42–45 min
Exit ticket
Prompt: Your pay rises 2%, but prices rise 4%. Did you get a raise? Explain.
Differentiation
Common misconception
“Cash under the mattress is perfectly safe.” It's safe from losing dollars, but not from losing purchasing power.
Support
Provide a table of 1.03 raised to powers 1–5 so students can multiply instead of computing exponents.
Extension
Research why the Federal Reserve aims for about 2% inflation over the long run instead of 0%.
Homework or make-up work
Students can complete the full interactive lesson — including its knowledge check — at learnwithflc.org/courses/money-fundamentals/inflation. No account needed; progress saves on their device.