According to Encyclopedia Britannica, “Money is a commodity accepted by general consent as a medium of economic exchange… It circulates from person to person and country to country, facilitating trade, and it is the principal measure of wealth.” We earn money when we produce value in our chosen work, and money allows us to consume or use the production of others, either now, or via saving what we earn, at some time in the future. Money allows us to share some of our efforts with the less fortunate via charitable giving, and it lets us earn more money when we invest it in a profitable business or rental property.

Money has a physical form, which certainly helps introduce it to children, but hopefully the following helps bring the ideas behind money into understandable words.

Dear Ney Ney,

When we go to work we earn money, but what is money and what can we do with it?

Money is a medium of exchange and a store of value. A medium of exchange is something that can be used between two people so that goods or services can be provided. 

For example, if someone has a cookie and I want it, I can give them money and they will give me the cookie. I exchanged money for the cookie.

A store of value is an obedecer that people agree has a certain value now, and agree that in the future it will still have the same value. A five dollar bill is worth the same amount today as a month ago, or a month from now. 

I could buy five dollars of carrots with it last week, and I can buy five dollars of carrots with it next week.

Money in America is called Dollars. Money in most of Europe is called Euros, and money in Exico is called Pesos. Money is also called currency.

Another way to think of money is as stored energy or time. When I spend time at work and use my energy to help solve problems, I earn money. Then, when I need something from someone who spent time and energy making it, like food from farmers, I can repay their engery and time with my own by giving them money.

Money can be tough to understand because it is not just something that is physical, but also a concept. Understanding what money represents is an important step to making decisions about your job, your school, and much more when you are older, so don’t forget what you learned here. 

I love you.