What is Money? A Simple Guide for Kids

Money is a part of everyday life. We use it to buy food, clothes, toys, and even homes—but how often do kids learn what money really is and how it works?

Most schools don’t teach kids about money, which means many grow up not knowing how to save, budget, or invest wisely. The earlier kids understand money, the better prepared they’ll be for the future!

This guide will explain:
✅ What money is and why we use it
✅ How money is earned and exchanged
✅ The importance of saving, spending, and giving wisely
✅ How to build wealth by making smart money choices

Let’s start with the basics!

1. What is Money?

Money is anything that people use to buy and sell things. It helps us trade goods and services without having to swap items directly.

A. What Did People Use Before Money?

A long time ago, there was no money! People used bartering, which means trading one thing for another.

🔹 Example: If a farmer had extra apples but needed bread, he would trade apples with the baker. But what if the baker didn’t want apples? That’s where money became useful!

💡 Lesson: Money makes trading easier because everyone agrees on its value.

B. What Forms of Money Exist?

Today, money comes in different forms:
💵 Cash – Paper bills and coins
💳 Digital Money – Money stored on debit/credit cards or apps
💰 Cryptocurrency – Digital money like Bitcoin

No matter what form it takes, money allows us to buy things we need and want.

2. How Do People Get Money?

Money doesn’t just appear—it has to be earned. People get money by working, selling things, or investing.

A. The 3 Ways to Earn Money

1️⃣ Working for Money (Income)
People earn money by doing jobs, such as:

• Doctors help people feel better.

• Teachers educate students.

• Store owners sell products.

2️⃣ Selling Things

• Kids can sell lemonade, crafts, or old toys to make money.

• Adults sell cars, houses, or businesses to earn income.

3️⃣ Investing Money

• Some people grow their money by investing in stocks, real estate, or businesses.

• Lesson: Money can grow when we save and invest instead of just spending!

3. The 3 Smart Ways to Use Money

Once kids earn money, they need to learn how to use it wisely. There are three main things we can do with money:

A. Saving Money 💰

Saving means keeping money for the future instead of spending it all right away.

🔹 Why Save?

• To buy big things like bikes, video games, or even a car later.

• To be ready for emergencies (like when something unexpected happens).

🔹 Where to Save?

• Piggy banks for small savings.

• Bank accounts for long-term savings.

💡 Lesson: “If you save now, you’ll have more later!”

B. Spending Money Wisely 💸

Spending means using money to buy things we need or want.

🔹 Needs vs. Wants

• Needs = Things we must have to live (food, clothes, home).

• Wants = Fun things that are nice to have (toys, candy, games).

💡 Smart Spending Tip: Before buying something, ask:
✔ “Do I really need this?”
✔ “Will I still want this in a week?”

C. Giving Money 🎁

Sharing money with others teaches kindness and gratitude.

🔹 Ways to Give:

• Donating to charity or causes you care about.

• Buying a gift for a friend or family member.

• Helping someone in need.

💡 Lesson: “When we share money, we help others and feel great doing it!”

4. How to Grow Money: The Power of Investing

Many people work hard for money—but the smartest people make their money work for them. This happens through investing.

A. What is Investing?

Investing means putting money into something that grows over time.

🔹 Examples of Investing:

• Buying a stock (a small piece of a company).

• Owning a business that makes money.

• Buying a house that increases in value.

B. Why Should Kids Learn About Investing?

• If you save $10 per month and invest it, you could have thousands of dollars when you're older!

• Money left in a bank account grows slowly, but money invested grows much faster.

💡 Lesson: “The earlier you start investing, the more wealth you can build!”

5. Fun Ways to Teach Kids About Money

Money lessons should be fun and interactive so kids stay excited about learning!

🎲 Play Money Games:

• Monopoly (teaches buying, selling, and investing).

• The Game of Life (shows how jobs and money choices matter).

📖 Read Money Books:

• Money in the Bag (A fun way for kids to learn about finance).

• The Berenstain Bears’ Trouble with Money (Teaches saving vs. spending).

📊 Use Savings Charts:

• Create a visual tracker for goals like saving for a bike or toy.

💡 Lesson: “Money is fun to learn when we make it a game!”

6. What Happens If We Don’t Use Money Wisely?

When people don’t manage money well, they can run into problems like:
❌ No savings for emergencies.
❌ Spending too much and running out of money.
❌ Debt (owing more money than you have).

Example:

• If a kid spends all their allowance right away, they won’t have money left when they really need it.

• If an adult buys things they can’t afford, they might get stuck owing money (debt).

💡 Lesson: “If we manage money wisely, we’ll always have what we need!”

Conclusion: Money is a Superpower!

Understanding money helps kids:
✅ Make smart choices with their earnings.
✅ Save for big goals instead of spending right away.
✅ Learn how to invest and grow wealth over time.

By teaching kids about saving, spending wisely, giving, and investing, we set them up for a lifetime of financial success.

Start teaching your kids today—their future selves will thank you!

Want to Raise Money-Smart Kids?

At Children to Wealth, we make financial education fun, simple, and engaging for kids and families!

📚 Our books, courses, and interactive tools teach kids how to earn, save, invest, and build wealth early.

👉 Visit www.childrentowealth.com NOW and start your child’s journey to financial success today!