The Basics of Money: What Every Young Person Should Know

Money might seem simple at first—it’s what you spend to get things you want, right? But understanding the basics of money, like how it's earned and why it matters, is a huge first step toward becoming financially savvy. Let’s break down the essentials in a way that makes sense, with questions to get you thinking and quotes from people who know a lot about money.

1. What is Money, and Why Do We Need It?

Money is what we use to trade for goods and services—whether it's a slice of pizza, a concert ticket, or a new phone. But money is more than just paper bills and coins. It's a tool, and it matters because it lets us buy things we need and want.

Think about it: What would you do if there was no money? How would you get things like food, clothes, or games?

Money also gives you options in life. As comedian Chris Rock puts it, “Wealth is not about having a lot of money; it’s about having a lot of options.” Money can help you make choices that fit your needs and dreams, like choosing a career, where to live, or what kind of experiences you want to have.

2. How is Money Earned?

Money doesn’t just magically appear. It’s usually earned through work or by providing something valuable to others. Think of the jobs people do: doctors, teachers, artists, engineers—all these people earn money by using their skills or knowledge to help others. In some cases, people also earn money by investing, which means they put their money into something (like a business or stocks) that can grow over time.

Ask yourself: What kind of job would you want to do to earn money? What skills could you learn that might help you earn more money?

Understanding how money is earned can make you appreciate it more. When you know the effort that goes into earning money, you’re more likely to spend it thoughtfully and save for what matters most.

3. Why is Budgeting Important?

Ever feel like your money just disappears? That’s where budgeting comes in. A budget is simply a plan for how you’re going to spend or save your money. It’s a way to keep track of where your money goes. As Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went.”

Consider this: What are some things you’d like to buy in the future? How much would you need to save each month to afford them?

By creating a simple budget, you can set aside money for what you want while also covering things you need. It helps prevent surprises and makes sure you’re using your money wisely. Budgeting doesn’t mean you can’t have fun—it just means you’re being smart about your choices.

4. Saving Money: Why Bother?

Saving money is like giving your future self a gift. When you save, you’re setting aside money for something you might need or want later. It could be for a big purchase, like a car, college, or even an unexpected emergency. The earlier you start saving, the easier it becomes to reach those goals.

Think it over: If you got $100, would you spend it all right away or put some of it aside for something bigger later on?

Saving helps you avoid debt (owing money) and gives you more freedom to make choices without worrying about running out. It’s a habit that pays off over time, especially when you get into the practice early.

5. The Power of Smart Spending

It’s tempting to spend every dollar on things you want now. But smart spending is all about making choices. Do you need to buy that new game right away, or can it wait? Spending wisely means thinking through purchases and deciding if they’re worth it. This helps you avoid regret and gives you more control over your money.

Ask yourself: The next time you want to buy something, think—how long will it make you happy? Is there something more meaningful you could save up for instead?

Smart spending isn’t about never buying what you want; it’s about buying what really matters to you. This way, you’ll enjoy your purchases without feeling like you’re wasting money.

Final Thoughts: Money is a Tool, Not a Goal

Remember, money itself isn’t the goal—it’s what you can do with it that counts. Learning to earn, budget, save, and spend wisely gives you control over your life and options for your future. When you use money thoughtfully, you’re setting yourself up for a path of possibilities and independence. So next time you think about money, consider how you can make it work for you, not the other way around.