In the first two lessons, Leo learned something big:

Now Leo is beginning to ask another great question about money and trust:

If money doesn’t create value, then why do we agree to use the same type of money?

The answer to this question is one of the most important in finance and it helps to explain why money sometimes works…and why sometimes it doesn’t.

Trust Is What Makes Money Work

Let’s say Leo wants to trade his tasty dog treat for a new toy. If Leo’s friend trusts him, the trade is easy. But if his friend doesn’t trust that the treat is good or that Leo will keep his promise, the trade is difficult or impossible. Money works the same way. Money only works when people trust it. That’s because:

Money works because people agree to trust it together.

This is something we use every day without ever even thinking about it, and until Leo started asking questions, he didn’t think about it either!

Leo learned that:

Money only works well when people trust:

If trust disappears, money stops working.

How Trust Affects Everyday Money

Think about this:

If that trust goes away, suddenly money is just a piece of paper or numbers on a screen.

That’s when problems show up, like:

The “something better” part makes Leo more curious…

Trust Is Money’s Foundation

Trust is like the glue that holds the whole money system together. Without trust:

In history, when people lost trust in money, money stopped working.

For example:

People stopped using that money the same way and turned to other stores of value like gold, livestock, or even foreign money! Leo learned something big:

Why Trust Sometimes Breaks

So what makes trust in money go up or down? Here are a few things that can weaken trust in money:

1. When Money Loses Its Purchasing Power

Remember how Leo noticed that the same money bought less over time? That change means:

Because trust is linked to predictability, unpredictable changes make people a little nervous.

2. When Too Much Money Is Created

If a government creates more money, but the same amount of goods and services exist, each unit of money represents less value.
This means:

If this continues, people might look for alternatives that don’t have these problems. We’ll talk more about that later…

Where Trust Comes From…And Where It Goes

People trust money for many reasons:

Trust Through Tradition

Most people grow up with certain kinds of money (like paper dollars and coins) and they assume they will always work.

Trust Through Law

Governments require that a certain kind of money must be accepted. That helps to keep trust strong.

Trust Through Stability

If money doesn’t change and if prices stay consistent, people feel confident planning, saving, and spending.

But trust weakens when:

This is why Leo asks another question:

Is there a kind of money that holds trust even when things change?

And that curiosity leads him deeper into how money works…not just today, but over time.

So What Happens When People Lose Trust In Money?

When trust is broken, people start looking for:

In the past, people turned to:

These were things that people felt confident having.

Leo learns that:

When trust in money weakens, people search for money that holds trust (or value) better.

That’s important to remember. It helps explain modern trends in finance, including why some people explore alternatives, like Bitcoin (something Leo learned and we’ll learn about soon!).

Let’s Look At An Example

Imagine Leo and his friend Max both have 10 bones saved for later.

• Max’s bones are slowly losing “value” because they’re going stale
• Leo’s bones are fresher and better preserved.

Soon, Max’s bones don’t seem as valuable or worth as much anymore.
Leo starts to wonder: Wouldn’t it be better to save something that stays fresh and useful?

In real life, people notice similar things with money:

Trust matters both today AND in the future!

Why Understanding Trust Helps You Feel Confident

When you realize that:

Then money becomes less confusing and less stressful…

Instead of thinking why prices seemed to spike all of a sudden, you begin to think about what caused trust to change and what you can learn from it. That change in thinking (from frustration to curiosity) is exactly what Leo is learning.

What a big change!

Final Thoughts…

You don’t have to be an expert to understand money and trust.

You can start by:

When people talk about money like this (openly and simply) everyone learns faster. When families learn about this, it will be passed on to other generations.

That’s the goal of Leo’s journey…to make money less confusing and more understandable, one question at a time.

See you in the next lesson!

Money and Value Are Not the Same Thing!

Have you noticed that things cost more than they used to? Food is more expensive and eating healthy is almost impossible for some. Toys even cost too much. For many people, this creates confusion, frustration, and worry. This isn’t because you’re bad with money. The value of things change over time and sometimes it’s a good thing and sometimes it’s not…but money and value are not the same thing!

This is called inflation…that’s what Leo is learning now…

In the last lesson, Leo discovered that money is a tool. In this lesson, he’s starting to notice something important: money doesn’t always keep its value over time. The same amount of money bought more in the past and buys less in the future.

This lesson is to help you understand how money and value work together, and why learning this concept helps everyday life feel calmer, clearer, and more manageable. Let’s explore this together!

What Do We Mean by “Value”?

Before we talk more about money, we need to talk about value. Value is about usefulness, importance, or benefit. It’s about what something does for us.

For example:

Value is the importance we put on something. It exists because we care about things, need things, or rely on things.

Different people can put a different value the same thing. One person might value time more than money. Another person might value security more than convenience. Value isn’t fixed…it’s personal and circumstantial. That’s an important thing to remember!

Money Is Not Value…It Measures Value

This is one of the most important ideas Leo learns: Money is not value. Money is a way to measure value.

Think about this…

Money works the same way. It gives things a number so we can compare them, plan, and exchange with others. When something costs $5 and something else costs $50, money helps us see the difference quickly. But the number itself doesn’t create value, it reflects what people are willing to agree on at that moment. When we confuse money with value, money feels emotional and stressful. When we understand money as a measuring tool, things feel clearer.

Why Money Doesn’t Always Keep Its Value

Here’s where Leo starts noticing something curious. If money measures value, why does the same amount of money buy less over time? Why does yesterday’s money feel “smaller” today? The answer is what’s called “purchasing power,” which just means how much your money can actually buy. When we lose purchasing power, money loses its value (even if the thing you’re buying is the same “price”)!

This doesn’t happen all at once. It happens slowly, over years. That’s why it feels confusing and a little shocking when you go to buy something you haven’t in a while and notice the big price difference.

Same Money, Different Results

Imagine Leo goes to the pet store.

Then:

Now:

The money didn’t change physically and the treat is the same type and recipe. The only thing that changed was the relationship between money and value.

This makes Leo more curious…and curiosity is the key to understanding money!

So What Causes Money to Lose Value?!

Money loses its value when more money exists than the value it’s meant to measure.

That might sound complicated, but the idea is simple.

If there are more dollars, but the same amount of food, housing, or services, each dollar represents a smaller piece of the total value available.

This can happen for many reasons:

The most important takeaway isn’t the cause; it’s the effect. When money increases faster than value, money measures less on the “ruler.”

So What Exactly Is Inflation?!

The word we use for money losing purchasing power is inflation.

Inflation simply means that as prices rise, money buys less than it used to.

Inflation doesn’t happen all of a sudden. It happens slowly and isn’t easy to notice. It’s a a gradual process and understanding it helps us prepare for it and get ahead of it.

How Inflation Works In Our Everyday Life

Inflation shows up in small, everyday ways:

This is very frustrating, especially for people and families trying their best.

But it’s important to understand that inflation is the effect of many changes and influences that are out of our control. Understanding inflation helps us stop being frustrated, start asking better questions, and helps us plan for our financial future.

Money, Trust, and Value

Money works because people trust it.

When trust changes, money changes. That’s why throughout history we have looked for different ways to store value, from gold to land to other systems (like rocks!). This isn’t a new concept, it’s always been part of the system. Understanding trust helps explain why money evolves over time.

Accepting Money’s Reality

It’s can be embarrassing to admit we don’t fully understand money or inflation.

But the truth is:

Not knowing isn’t your fault. Learning at any age will help you prepare for your financial future.

What Understanding Money and Value Gives You

When people understand money and value, something shifts.

You don’t need to know everything about money…you just need to understand it better. Understanding creates confidence and empowerment.

How Families Can Talk About Money and Inflation Together

You don’t need big lectures or complicated charts!

You can simply:

When discussing this with our families, we need less fear and more clarity. This builds our confidence and helps us plan better for generational wealth!

Final Thoughts: Money Changes and Understanding Helps Us Change Too!

Money and value are connected, but they aren’t the same.

Money doesn’t always keep its value. Inflation slowly changes what our money can buy. Understanding this helps us to feel confident instead of frustrated and surprised. Leo is learning that changing our perspective about money is empowering and helps us plan better.

In the next lesson:
Leo the Puppy explores why trust matters so much in money and what happens when we start asking better questions.

Let’s face it…life is all about changes, right? Just look at the penny…well, money changes too!

Most of us grow up using money way before we even understand it (if we ever really do). We’re told to earn it, save it, and spend it…but rarely are we taught what money actually is or why it behaves the way it does. Many adults don’t feel confident explaining basic money concepts to their children; not because they don’t care, but because no one ever explained it clearly to them either (probably because they didn’t understand it too).

That’s where Leo comes in!

Leo is a curious puppy who started asking simple questions about money…the same questions many adults still wonder about today. This lesson is the very beginning of his journey and yours. No pressure. No jargon. Just a calm, friendly explanation to understand what is money and what it isn’t, why it exists, and why learning about it can help you feel more confident about your financial future.

Let’s start at the beginning…together.

So What Is Money?!

At its core, money is a tool.

(No, not this kind of tool!)

Money is something people use so they can trade something of value with each other. It’s not the same as value, though, it’s just a way to help people exchange things like goods or services.

For example:

Money itself isn’t valuable. It’s valuable because people trust it and agree to use it.

The idea of agreement and trust is very important and we’ll come back to it later.

Why Do We Use Money?

Before money existed, people traded things like rocks and other things directly. This was called bartering.

Imagine Leo wants a bone, but all he has is a toy. He finds a dog with a bone, but that dog doesn’t want the toy, he wants food instead. It makes it difficult for him to trade with that dog. Money makes this easier.

Instead of trading item-for-item, money allows you to:

Money doesn’t create value, it helps move value.

The Three Main Reasons for Money

Money does three important jobs:

1. Money Helps Us Trade Things (this is called a “Medium of Exchange”)

Money allows people to buy and sell things without bartering. This makes everyday life simpler and faster. Leo wants to walk into a store without having to hope he has the right thing and the right amount of that thing to barter every time he needs something.

Money is the agreed upon “trade” that helps us get things we need.

2. Money Helps Us Measure Prices (this is called a “Unit of Account”)

Money gives things a price so we can compare them. It helps us answer questions like:

When people say money is a unit of account, they’re really saying this:

Money is the measuring stick we use to talk about value. Just like we use inches to measure length or minutes to measure time, we use money to measure how much things cost. Money helps us put numbers on things so we can compare them.

A Leo Example:

Imagine Leo walks into a store. He sees:

Without money, how would Leo know which one “costs more”? He might think:

That can get confusing very fast. Money solves this problem. Instead of guessing, everything gets a price. Now Leo can see:

Suddenly, comparing things becomes easy!

Why Prices Matter

Prices help answer important everyday questions, like:

Money doesn’t tell us what we should buy…it just helps us see the differences clearly so we can make an informed decision. That’s what a unit of account does.

Money Isn’t Value…It Measures Value

This part is important. Money itself is not value. It’s just a way to measure value.

Think about a thermometer. A thermometer doesn’t create heat, it just tells you how hot or cold something is. Money works the same way…it doesn’t create value, it helps us measure it.

When the Measuring Stick Changes

Here’s where things get interesting (and where we’ll dive deeper later in Leo’s journey). If money changes over time…if prices go up and the same amount of money buys less, then the measuring stick is changing. That can make it harder and more confusing to compare things:

This is one reason people sometimes feel confused or frustrated about money. The numbers are still there, but the meaning and value shifts.

Why Understanding This Helps

When we understand money as a unit of account and know that it is being measured:

It helps us stay calm, confident, and informed. And that’s exactly what Leo is learning to do.

3. Money Helps Us Save (this is called a “Store of Value”)

Money lets us save today so we can use it later, but as we’ll learn in future lessons, money doesn’t always keep its same value forever. But if Leo buries 10 bones today to save for his future, those 10 bones won’t be worth or valued as much in the future. There are a lot of things that cause this and make it challenging to make plans, but awareness is the first step.

So, money helps us trade things, measure the price of things, and money helps us save up and prepare for our future! These three reasons are why money exists!

Where Does Money Come From?

Money used to be tied to physical things like gold or silver. These were hard to find, hard to copy, and hard to transport, but they were trusted.

Today, most money is created by governments and “central banks.” It exists mostly as numbers on screens rather than physical bills or coins. Yes, they can print more money to make more numbers on a screen, but that doesn’t help (it actually hurts!).

The money system works because people trust it and because laws require it to be accepted.

Trust plays a big role in money. When we lose trust, money changes. Understanding this helps explain why people sometimes look for alternatives, which is something we’ll explore a little later in Leo’s journey (and yours!).

Why Does Money Change Over Time?

Have you noticed that things cost more than they used to? That’s because money can lose “purchasing power” over time. This is what is referred to as inflation. Just look at the penny! One day we could use it as a unit of exchange, but now we can’t because it’s not worth what it once was. The penny isn’t even worth the amount of money it costs to produce it! It also way too many pennies now to buy anything, so it’s just not “worth” it.

What matters is this:

Learning to notice these changes shouldn’t be scary. It’s meant to help people feel informed instead of surprised or shocked.

Why Learning About Money Early Matters

Stress about money comes from confusion and misunderstanding, not from a lack of effort. Don’t be disappointed, you’re learning now and that’s what matters.

When people (and families) understand money better:

Learning about money today doesn’t mean making big decisions now. It simply means building awareness for your future…and awareness is empowering!

Final Thoughts…

Money doesn’t have to be mysterious or scary or stressful. Learning about it doesn’t have to be complicated.

When we understand what money is (and what it isn’t!) we start asking better questions., we notice patterns, we feel more confident, and most importantly, we give ourselves permission to learn at our own pace. When children learn early about this, they are equipped to make better decisions about money and their financial future. This is just the beginning of Leo’s journey (and yours!).

In the next lesson:
Leo explores why money doesn’t always keep its value and what that means in everyday life.