Financial Literacy for Children: Episode 1 – Introduction to Money

Previously, we have spoken about how to initiate money-related conversations with your child. We understand that money is a vast topic and needs to be explained in a step-by-step manner. The key is to ensure that your child has fun while learning about different financial concepts and that their understanding is thorough. 

That’s where BYJU’S Piggy Bank comes into play! Today, we will cover:

• What is money?
• What has been used as money in the past?
• How do people get money to buy things?

(Parents can read the sections at a pace appropriate for their child and then solve the worksheet together)

What is money?

Money is what that we use to pay for products/goods (toys, soaps, pencils, etc) and services (ironing, cleaning, etc) that we want or need. 

For example: 

• We pay the shopkeeper the price of the toy so that we can bring that toy home to play with.
• We pay the milkman in return for a packet of milk every morning. 
• We pay school fees in return for the services provided by our teachers. 

A buyer is someone who buys the products and services with money. A seller is someone who sells products and services for money. 

Money also does something quite interesting. It is one of the widely used methods for determining the value of something. 

For example:

• A tougher, less-breakable toy is likely to cost more than a breakable toy.

Exercise: Make a list of all the things that your parents have bought for you in the last one month. 

What has been used as money in the past?

We all have seen a 10 rupee note and a two rupee coin, haven’t we? In today’s world, money is seen mostly in the form of coins and notes. Would it shock you to hear that this wasn’t always the case?

In the past, people used the barter system to buy or sell things. Barter (verb) means to trade goods or services in exchange for other goods or services.

For example: 

• You could exchange goods, like pots for other goods, like shoes. A potter who has excess pots but does not have shoes can exchange pots for shoes, as the cobbler has many shoes but does not have enough pots. 
• One could similarly exchange services. A doctor may charge for her services according to her patients’ professions. A tailor may pay for his appointment by mending the doctor’s shirt.

Nice, right?

Exercise: Can you think of a time when you engaged in a barter exchange with a sibling or a friend?

How do people get money to buy things?

Now we know that money is used to buy things that we need or want. We also know that often money is used to determine the value of something. 

But, how does someone get money? Let’s get into that. People typically get money through either income, gifts, or prizes. 

For example:

• People may get – earn – money by doing work for someone else, like at an office.  People also earn money by selling things to others. Money that is earned is called income. 
• People sometimes give money to someone as a present or a prize for a special occasion, such as a birthday. Such money could be either a gift or a prize. 

Exercise: Think of the different means you see in a day through which a person can earn income.

Did you find this article helpful? Share your thoughts, feedback and suggestions with us in the comment section below or drop a mail at storyweavers@byjus.com. 

Disclaimer: This blog has been written for children between the ages of 5 and 7. Parental discretion is advised. 

<Download the worksheet here>

Also read, 

• Financial Literacy for Children: Episode 2 – What is a budget? 
• Financial Literacy for Children: Episode 3 – Needs Vs Wants 
• Financial Literacy for Children: Episode 4 – What are Savings? 
• Financial Literacy for Children: Episode 5 – What is Investing?