How to explain the yield rate to a 10 year old children?

Answer 1

I find the best way to illustrate the time value of money is to start with this question: "Would you rather have a hundred dollars right now or a hundred dollars in a year?"

It is rare that anyone -- even a 10-year old -- doesn't see that it is better to have $100 now. But even if they don't, you can explain how you can put the $100 under your mattress for a year & have it then -- so you can't be worse off taking it now.

Next move to another question: "Would you rather have $50 now or $100 in a year?"

Change the price around until you get the point where he is indifferent between the two choices. From this point, you can talk about the choice that investors make between spending now or saving, and why they demand a return on their investment.

That gets you to yield. I used this technique with my students at Wharton and found it a pretty effective introduction. I introduced risk aversion in a similar way (would you rather have $900K for sure or $2MM if this coin flip comes up heads and nothing if it comes up tails?)

Answer 2

using the help of the defination given here:
http://www.investopedia.com/terms/y/yield.asp

I'd say perhaps try a visual demonstration with coins.... e.g. a starting amount of £1 / $1 (or whatever your local currency is), and add more pennies to represent the rate of return..... perhaps eventually give them a question to see if they've grasped the idea, like "If the rate of return is 35%, how much money do you have now?" (and perhaps let them keep the money if they get it right).