What is Money?

Nina 5 yrs - Her thoughts of money - a coin and a piggy bank

According to Wikipedia the definition of money is “any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context, or is easily converted to such a form.” This is a bit of a mouthful for my 5 year old so the question is what is money?

Well, simply money is something you earn through exchanging something of value (e.g. your expertise, your time, something you make, produce or sell) and you give up for something you want. How much money you earn or give up is determined by what someone else is willing to pay.  If you have a play shop or cash register at home I find this is an easy and fun way to show your child how it works.  Give them some real coins or play ones, label a few of their toys with prices (numbers) and ask them to buy the toys they want with the money they have.  They’ll soon see they cannot afford everything and will have to make choices about what they really want for the money – less things of higher value or lots of things for smaller values.  It is also is a great way to practice math!

Last week, when my daughter asked for the latest Barbie campervan my comment was ‘I can’t afford it, I’ll keep it in my mind for your birthday”, the usual response is “ok mummy” but this time I was confronted with, “just put in on the card”.  When lots of purchases are now made electronically through credit or debit cards or electronic transfers, the simple act of counting how much money you have and taking it to the store is not always practical. 

​Having a bank account or a virtual piggy bank for your child is one way to show when something is bought with a card or electronically the value in this account is decreased brings back some connection between the physical and electronic. ATMs are a classic example, many children believe money comes from a machine in the wall.  Understanding where money comes from and how it is earnt is definitely something to explain to children at a young age.

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