Get your kids ready to make smart decisions about money and form good habits about spending and saving from a young age!
1. What are goods and services?
We acquire the things we need (and when possible, the things we want) through the exchange of goods and services. Goods are items. Anything from a pencil to a computer to a box of spaghetti is a good. Services are things that people do. Driving a bus, mowing a lawn, being a doctor, working as a police officer – all of these jobs are types of services.
We trade goods and services to get the things we need and want. For example, a builder can construct a barn for a farmer, and in exchange receive the farmer’s vegetables to eat; in this example a service (building a barn) is traded for a good (vegetables). Often, money is used to help in the exchange. Say the farmer needs a barn but the builder doesn’t need any vegetables. Instead of the farmer directly trading his goods for the builder’s service, the farmer can trade some money instead. Since money is something everyone deems valuable and worthy of accepting for a trade, the builder can take the money and use it to trade for whatever else he does need.
2. What are needs and wants?
You might already be familiar with the idea that there are a few basic things all people must have to survive. These things include food, clothing, and shelter and are known as needs. Needs can also include things that are essential to sustaining or improving your quality of life, like medicines and education. In addition to needs, many people also have wants. A want is something that isn’t essential to survival, but which we would like to have if we can, such as toys, movie tickets, or a swimming pool.
We must always first take care of our needs because those are the things that keep us healthy, safe, and able to lead a good life. Understanding the difference between needs and wants is important because it can help you know how to spend and save wisely!
3. Why do people have to pay for things with money?
Money is a system for trading (bartering) between people so we can all get the things we need and want. Say, for example, that a farmer needs some bricks to build his house. To get the bricks, he can trade what he has (vegetables) with what the mason has (bricks). However, if the mason only needs fruit and not vegetables, then the farmer can’t get his bricks! He’d have to try to trade his veggies with the owner of the apple orchard, and then trade the apples to the mason for his bricks.
Instead of trading and trading over and over again until they can get what they want or need, people use money, which is something everyone deems valuable and worthy of accepting for a trade!
4. Where does money come from?
People have been using types of money for thousands of years as a form of trading. Early forms of money might surprise you; before paper money, people used things like shells, stones, fur, gold, and silver as their currency! “Money” can be any item with a value that is agreed upon.
Today, most money is paper money that has been specially printed by a country’s government. It gets its worth simply by being something that everybody agrees to use in exchange for goods and services! Since everybody uses money as their system for trading, everybody agrees to let it have value and be worth something!
5. Why do people put money in the bank?
There are two main reasons why people keep money in the bank. One reason why people put money in the bank is that it helps keep it safe. Because they deal specially with money, banks have very safe ways of keeping money locked up where no one can try to steal it! People keep their money in the bank because they can trust that it will be safe.
People also put money in the bank because it can help the money grow and turn into a larger amount by earning interest, which is like a reward the bank gives to people for keeping their money in that bank! The interest the bank pays to people for keeping their money in the bank comes from interest that other people pay to the bank in exchange for being allowed to borrow money.
Stop breaking the bank buying your kids everything they want and use the above parenting tips to make your children understand that money doesn’t grow off of trees! Take the time to tell MommyMatter how you handle your children’s money knowledge now!