Gelduitleg kids might say that “money makes the world go around,” but how much do they really know about what money is and how it works? The word money has many definitions, but it is most broadly understood to mean something that people will accept in exchange for goods and services. It is important that kids understand the importance of money and the role it plays in our society.

Explaining money to children can be tricky, but the best way is to start early and keep it simple. For example, when they pay for something at the grocery store or the movie theater you can point out that they are using money they earned from work. It’s also a good idea to explain the concept of saving and spending, so kids can begin to connect how hard they work with the things they buy with their money.

Money Matters: Exploring Its Functions and Importance

You might also talk to them about the history of money, which has evolved from cowry shells and peppercorns in ancient times to barley, gold, and paper notes today. The main function of money is that it is a medium of exchange, but it also serves as a unit of account and a store of value.

Ideally, money should be durable, divisible, transportable, and non-counterfeitable. This is called the money standard and is what defines the most widely used forms of money today: the monetary aggregates M1 and M2. What is less well known is that commodity backed money—such as Kent cigarettes or mackerel—can also serve as a medium of exchange.