What is money? Do your kids know?

I was wondering. Do you teach your kids about finances? I mean really sit down and educate them about what money means.  And I’m not just talking about this is what a dollar looks like; this is what a $100 bill looks like.  No, I mean explaining that it is a medium of exchange, an element of accounting, and a store of value.

In the raising of my kids I have neglected to really educate them on the meaning of money and what its purpose is supposed to be. This is what they need to understand.

Money is a medium of exchange. Throughout the world we all have decided to accept it in making transactions.  Businesses, dealers, traders accept money in exchange for their goods or services.  And we all choose to accept money in exchange for the property of our labor.

It is used as a unit of accounting. This significant element of money provides us a way to identify and communicating value of something. This convenient and simple unit of accounting allows people to communicate the value of things very easily.  It allows us to ask “how much is that pair of shoes?” That this pair is more expensive than that pair or that I need to work a few more hours in order to afford them.

Money allows us to accumulation or store the value of our labor in a pile of cash. For some our labor is worth more than others, but in the end for all of us we can measure our hard work in the reward of money. Without this measurement, we could not set aside and store this compensation for later use. If we were paid in bushels of corn how would we set this aside for later use? Being paid in gallons of milk would only see our hard earn efforts sour in a week or two.

Money can be in any form, but the best is easy to carry, light weight and can be easily broken into smaller units for exchange. Try hauling those bushels of corn to the store to but that new refrigerator.

So teach your kids about the true meaning of money.  It will help them later in life as they see the value of their hard labor pile up in the bank.