A question from our favorite cartoon eating utensils. What is Money?
In short is it a medium to exchange goods and services. In the past countries like the US used to back their currency by precious medals like Gold.
The good thing about money she is a very hard worker. If you can put her to work for you she will grow and multiply and help led you to retirement(time where you can enjoy your favorite activities). The thing is she works slowly so her friend time is another big part of her working for her.
If you leave money by herself he can get kinda lazy and gets smaller. This is called inflation which makes she worth less. Meaning that breakfast you bought last year may require more money to buy it this year.
How do we get money to work for us. Here is the fun part. It really isn't very hard to do.
The first way to a Savings account. You give you money to the bank to hold for you and they give you a certain amount to hold her for you. They usually calculate that amount on a percentage and give you the interest based on that percentage. The good thing about this way is it is safe and predicable and you money will not get smaller doing this. Lets say you have $5 dollars and you let it just sit there for in a savings account for 30 years it will end up being $9.11. That is time and money working together at the bank.
The second way is though the Stock Market. The stock market is where people buy and sell portions (shares) of a company. In this way you buy portions of companies and the companies shares with you profits in what they call dividends. The reason money can grow faster in the stock market is other people want to own the companies you have so they are willing to pay you more. This is like buying a Pokemon card today for a dollar and your friend is willing to pay you $2 for it. Lets also put $5 dollars into stocks and money and time work for 30 years and you will end up with $50. Wow that is much bigger. How did that happen? Well there is demand for owning companies so growth is quicker roughly 8% so money and time working together has a bigger impact. One thing to know is some times the stock market goes down and you lose money. This can happen, but over long enough period usually that is not the case.
The last way is to just keep it in your piggy bank. It's save you have access to it and you can spend it anytime. This is way your $5 is worth $5 now and when you take it out in 30 years. But in 30 years your $5 will really buy as much as having $2.06.
This all gets more fun the more money and time you have. Let her grow.
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