When changing between currencies, the most important thing to know is the exchange rate. The exchange rate tells you how many units of one currency equal one unit of another currency. For example, $1 U.S. (USD) fluctuates between 3.1 and 4.0 New Israel Shekels (NIS). There are numerous Internet sites that offer free exchange rates and currency converters. Coinmill.com and XE.com are two such sites.
The International Monetary Fund recommends simulating an auction situation in order to teach students how to exchange money. There are two parts to this auction: in the first part, students simulate buying goods only from their own country and in their own currency. In the second part of the auction, students simulate buying goods from foreign countries. Before buying the goods, however, those students will need to exchange their simulated U.S. dollars for simulated foreign currency.
In parts of the world, bargaining over the price of goods is the norm. Often, as travelers attempt to negotiate prices, they will hear something like “just give me $10.” That $10, however, may be a higher price than that previously suggested by the traveler or the merchant in the currency of that country. There are a couple of different ways to test this skill. The first is to provide students with a short worksheet with several problems of this nature. On this worksheet, students would need to calculate prices across these two currencies. The second method comes via acting; have students simulate a market situation in which the teacher attempts to trick them.
Some exchange rates will be favorable to holders of U.S. dollars, while others are not. An exchange rate in which $1 equals more than one unit of foreign currency will be favorable to Americans, since spending any amount of foreign currency will mean spending fewer dollars. The reverse, however, may be harmful, since the dollar does not go as far. This would be the case in England, since — as of September 2011 — $1 equals approximately .65 pounds sterling. To enforce this concept to a beginner, present several imaginary goods along with their prices in different foreign currencies. Ask students to calculate the prices of these goods in USD to understand how far a dollar would go in each country.
Never simply estimate when converting money. Exchange rates fluctuate — by large or small amounts — every day and a fraction of a point difference means more than pennies. A good way to learn the effects of small fluctuations in exchange rates is to simply do the calculations. Simulate a scenario in which a student plays an American with a bank account in U.S. dollars who has to rent an apartment in Israel. The rent on the apartment is 3,000 NIS per month and the student has to withdraw this money from that American account using an ATM every month. Adjust the exchange rate by .1 points every time and calculate the dollar amount equivalent to that rent with each simulated fluctuation in the exchange rate.
