Leo’s Lesson Three🐾
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:
Money survives only when people trust it, and when trust changes, money changes too!
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! 🐾
