It’s important to start off with a baseline before venturing into an entire lesson plan. This is the beginning of many lessons to help set the average Joe out on the right foot for financial freedom. The idea is to reach retirement and not be worries about how to pay the bills.
Money is exactly what we agree it is as a society. That $20 bill in your pocket – who says it is worth money? Who says it can buy goods and services? Everyone. The government sets it, and we’ve all agreed on it as a society. It gets a bit more complex than this when you look at the central bank’s definition. There are different types of “Money” and what people have in cash, what banks have, what’s out there in investments, etc. It’s complex. But it provides value. In fact it does three important things:
Medium of Exchange: You can trade money for stuff!
Unit of Account: You can use it to determine value – $10 for something is twice as valuable as something else you can get for $5.00
Store of value: It is still worth something later if you save it, it holds its value (inflation burns this a little bit).
If you find this stuff interesting, you can watch this Macro-Economic video:
Debt is simply borrowed money. So you can do more now and leverage your earning potential to pay it back later. You want more now for less later, that is the trade off.
Your investing (and evening your saving) is someone else’s spending. Instead of borrowing it, the other person is giving you a certain percentage of their project, company, etc.