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On Money (Explain like I'm 5)

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A 5 year old asked me this:

When did people not have money? How do we make money? What is the best kind of money?

 

Here's my reply which his dad will read to him with additional explanation:

 

A long time ago, when people lived in small villages and all did mostly the same type of work (as hunters or farmers), they did not have much need to trade with each other. So, they did not use money.

When people began to trade more with each other, they realized that certain items would usually be welcome by other people. Someone might want to get a knife from a blacksmith. He might try to trade a pair of moccasins or a bag of wheat-grain. The blacksmith may not want moccasins, or maybe they were the wrong size! But, he could always use some grain. Some items -- like grain, sheep and cattle -- would usually be acceptable to most people. Even if the person did not want them for himself, he knew he could probably trade them to someone else. These types of goods were the early forms of money.

Over time, metals like copper, silver and gold became popular and standard items to trade. They became money. One can keep silver and gold for many years. They won't spoil like grain, and you don't have to feed them all the time, like a chicken. 

The early type of money were just some type of good: grain, cattle, silver. So, it was made by farming,herding or mining.

 

If anyone has a better age-appropriate explanation, feel free to post. Otherwise, comments are welcome.

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A 5 year old asked me this:

Here's my reply which his dad will read to him with additional explanation:

 

If anyone has a better age-appropriate explanation, feel free to post. Otherwise, comments are welcome.

 

I think it is good, in essence. I think a 5 year old might not know these terms (to name a few): blacksmith, moccasins, grain, or even cattle. I think you can explain it using things he deals with on a daily basis, which also will help concretize what you are trying to explain. For example, instead of moccasins, use a pen, or, instead of grain, use a paperclip. It will help him visualize it.

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You have a point on the terms. I didn't think of using modern examples because I was trying to give a sense of the history. I did wonder about moccasins. I should have used shoes. I wanted to choose something where sizes and fit mattered. His dad will read this out to him, be-time story style... likely with explanations and side-tracks; so, I'm covered. I was so tempted to throw a dinosaur in, because this kid is obsessed with dinosaurs, but I didn't want to distort history :)

 

Thanks for taking the time to give me feedback.

Edited by softwareNerd
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A 5 year old asked me this:

Here's my reply which his dad will read to him with additional explanation:

 

If anyone has a better age-appropriate explanation, feel free to post. Otherwise, comments are welcome.

 

My Dad used to sum up the dealings my siblings, me and friends had with each other by saying, "Anything shiny, anything sweet".  By around the same age as the 5-year old you cite, my siblings and I would trade things with each other and our friends.  If we couldn't find a way to make the trade directly, we scrambled for something that would be acceptable.  We hadn't conceptualized the double coincidence of wants to any greater depth but we solved it on the spot by saying, "Well if you don't want this, then how about this over here."  With that, we discovered the value of bubble gum, Life Saver Mints, particular types of sea shells and beads that were yet to be threaded into necklaces.  

 

We used all these as money.  For example, I bought a test tube from my oldest Brother with three pieces of Bazooka Bubble Gum.  I knew that he didn't want the test tube any longer.  So instead of five pieces that he asked for, he settled on three.  My Sisters and her friends loved making beaded necklaces.  One of them bought a doll from a friend with a handful of red and green beads.  All of us really enjoyed making houses and forts from Popsicle sticks and glue.  When a friend showed up with a small bag of the sticks, we were all eager to trade with him.  He bought a whole bunch of things from us that day using his sticks as money, which was perfectly acceptable to us.  And to our young minds, he had a remarkably new idea.

 

I can remember hanging out in our tree fort with friends.  One of them asked out loud something to the effect, "We use bubble gum to buy things.  But what did kids use before bubble gum was made?"  My younger Brother piped up, "They used dimes made of silver.  My Dad still has a whole bunch of them."   And I said, "But they don't use those anymore though.  My Dad collects them and puts them into books." 

 

I know that I haven't gone back into history to answer your question in terms a 5-year old could understand.  My thoughts on history back then came from picture books, stories we were told and shows on TV.  They were all very cool.  But what was cooler at the time was anything shiny or anything sweet.

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... ... anything shiny or anything sweet.

Interesting. This morning I was thinking that I should have closed my explanation with a question like "what would you and your friends like to use as money". I wondered if I'd have got an answer like "candy" or "chocolate". After reading your post, I might do a little "part 2" along the lines of "money kids use".

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I’ve had to work through this too.  My story was very similar actually, outside I used different items.  I like the moccasins idea as it shows how goods poorly transfer to every person (and I like that it is dated to the period but your right, shoes would be better based on age).

The only thing I did different is I added that metals were better because they were smaller and transportable.  A couple of coins are easier to hold then a several chickens and a gold bar is easier than taking the whole cow herd with you to the store!

The nice thing is, as some point when you get to wealth and savings, this transfers nicely to that conversation too.  Money is easier to save then a hen house full of chickens or a barn full of wheat and allow for people to save for the future. 

 

Tell the kid the dinosaur had to eat his meal today but people learned to save food for the future and money made it possible to do that.  The poor T-Rex could not save food for the future so he was forced to hunt daily J

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  • 2 weeks later...

Kids in my area using trading cards as money. They are just pieces of paper, but they are valuable nonetheless. Other kids (and grown-ups) are using online game things and online game "money" (gold pieces or whatever) as money.

 

The point is that anything that a given marketplace (which can be as small as a brother and a sister) finds valuable can be used as a liquid trading mechanism.

 

This is an outstanding exercise in Epistemology, by the way. While I'm usually weary of "explain it to a 5 year old" explanations of subjects that cannot be explained to any human lacking an enormous context ("explain the Arab/Israeli conflict to a 5 year old"), very basic mechanisms like this work great. This makes you think of the origins of the notion of "currency" and "money" from its basic roots in physical usefulness, not as a floating abstraction, based on politics for instance.

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