The sappy gelduitleg.nl  may tell us that money makes the world go round, but most people probably couldn’t explain exactly what money is and how it works. That’s a problem, because the more kids understand their parents’ money decisions, the better. “Kids are impacted by their parents’ money choices, whether you want them to be or not,” says Misty Hemphill, CFP and coauthor of Kids and Money: Giving Them the Savvy to Succeed Financially. “And while it can feel awkward, there are plenty of teachable moments.”

Making Sense of Money: Tips for Financial Literacy

1. Medium of Exchange
The first function that money fulfills is the ability to pay for goods and services. This is why cowry shells, barley, peppercorns and gold have been used as money throughout history. To serve as a medium of exchange, something must be easily translated into prices and widely accepted.

2. Store of Value

The next function that money provides is the ability to hold its value over time. Consider that $20 tucked into your grandmother’s birthday card. When you find it a year later, it’s still worth the same amount. That’s because it has served the purpose of storing value.

3. Unit of Account

Finally, money serves as a unit of account, allowing individuals to compare the value of their goods and services with others’. This allows them to make trades more efficiently than they could through bartering. Money has evolved from a mix of cowry shells, skins and even barley to today’s paper bills, coins and bank accounts, but its essential functions remain the same.