At any age, gelduitleg.nl to understand the value of money. They need to know where it comes from and how they can get it. Otherwise, they will not learn to spend wisely or save for future needs. Too many kids think money simply comes out of the ATM or that cash is on tap from their parents whenever they want it. This is why teaching kids the three basic functions of money is one of the first steps in a financial education.

1. Medium of Exchange

Money allows us to purchase goods and services without needing to trade anything in return. This is why it is considered the most important function of money. It’s how we can book a holiday or buy a car without trading our home-grown tomatoes for a haircut.

2. Store of Value

Money helps us to hold onto what we’ve earned. It’s how we can put that teddy bear or video game on hold, knowing we will be able to afford it down the road. But, in order for something to be considered money it must also have a consistent purchasing power over time. If a new pair of shoes can only be bought with money, then those shoes will not serve as a reliable store of value.

3. Transferable Intangible Good

Lastly, money must be readily transferable intangibly between people and across borders. This is why coins, bills and digital money (on debit cards) are all considered to be money. The Federal Reserve System is responsible for creating these forms of money. It is a powerful yet intangible form of wealth that the government regulates for the benefit of the people.