This especially important today in that economic crunch we live in and must follow the money to control it. It would be good to teach this to your children to avoid the pitfalls they will encounter:
Barter System is compensation for the work you do in exchange for something both parties agree on. To exchange or give in exchange; doing something for something. You have something someone wants and are willing to exchange it for something you want.
This can be done in a couple of ways: Doing something that a person needs or giving something that person needs in exchange for what you want and exchanging something for money (currency).
Money is any form of token, as coin, banknote, used as a method of exchange authorized by state government known as currency. Money is like a promissory note which affects one's honor and integrity. This is conveyed through cash/coins that are commonly accepted for services and/or goods. It is a form of a barter system commonly accepted. This is used either by the actual exchange of currency or a personal promissory note such as a check of which you put your money into a financial institution as a bank where it can be redeemed for currency or a credit card or a debit card.
How to control your money:
You can use a bank or financial institution to safely hold on to your money you earned and accummulated. They save it for you until you wish to use it. The other way is to use their credit card which is a loan or advancement of cash that you have to repay for a fee. The other choice is to save and hold your cash at home or on your person which can be considered unsafe as it may be lost or stolen.
Understanding Credit and Debit
Credit - The amount of currency at one's disposal usually at a bank; in commerce (buying and selling) the general system of buying, borrowing and lending based on good faith and confidence. A collection of currency used to buy goods and services.
Debit - It is opposite of credit; an item entered on debtor side of an account; to charge with debt. Something owed to another; a liabilty (answerable and responsible or obligation); debts.
Simply put: credit = plus and debit = minus.
Budgeting and Keeping Track of Your Money
Budget is a plan for systematic spending. To plan one's spending of money and visibly see where you money is going. To list your sum of money you receive and put that against the money you spend or debts you have incurred or built up which you are obligated to pay. List what you earn and what expenses you have to pay out to settle your debts you have made.
To live within your means or what you can afford to spend without going into constant debt, you need to write out a budget to fulfill your obligations so as not to spend over what you earn to exchange for the goods and services you desire and want.
In your budget, you want to make sure you have some money to save for unseen or sudden expenses that may come up unexpectedly. The object or goal is to make sure you do not owe money you do not have. Your word and statements, things you say, depend on your honor and integrity which preserves your credibilty and ability to pay for something in exchange of what you want and need.
To do this, make a list of your earnings or credit you know you have and list what it is to be spent on; which is listed as your debit. Subtract or take away what you spent from the money you have accummulated or saved. This lets you know how much money you have and on what you are spending with it. This tells you whether you are living within your means (what you can afford) or not and how to fix any money problems you may have in doing your money management.
You want to make sure you have saved enough for emergencies by setting money aside as a savings to protect your liability.
Recognize this U.S. American culture is conditioned on consumer spending and buying whether we need the products or not. One can see how media programs, ads, emphasizes on keeping up with the "Joneses" using sales and marketing techniques to induce one to spend money. There is a widening of the earning power versus the cost of living that has increase remarkably to enslave the everyday person. Financial institutions encourage you to borrow money to meet your created needs; making you beholden to them.
Beware of the buy now; pay later schemes of businesses. What sounds like a deal and savings will cost you more in the end. The worst scenario is having a credit card where interests can generally be up to 30% charged against you plus fees. The trick is paying off the interest rather than the amount of the loan. There are many pitfalls for the consumer; you have money they want and will help you spend it in creative ways to get the "piece of your pie". In order to do that, they will tell you what you need or want and not necessarily what you truly need.