How to explain to elementary school students what a forward contract is

A forward contract is a type of agreement between two people where they agree to buy or sell something in the future, at a set price.

To help explain this to elementary school students, you can use an example of a toy that they might want to buy in the future. Let's say that they really want a new video game that hasn't come out yet, but they're worried that the price might go up before they can afford it.

A forward contract would be like making an agreement with a friend to buy the video game for a set price when it comes out. They would agree to pay your friend a certain amount of money, and in return, your friend would promise to give them the video game when it's released.

This way, they can be sure that they'll be able to get the video game at a price they can afford, even if it becomes more expensive later on.

Overall, a forward contract is just a way to make sure that you can buy or sell something in the future at a set price, even if the market changes.