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How can I explain to my children where money comes from?

When you talk to a child that's three to five years old, you can explain that the money your family spends and saves comes from working.

This may be hard for younger children to grasp, especially these days when most paychecks are deposited directly from your employer and cash comes out of the ATM.

Describe the jobs you, your spouse and others in your family go to every day. Walk through the neighborhood or town and point out people working, like the bus driver or police officer.

You may also want to explain that some people start their own businesses like stores or restaurants. They make money through profit, by buying goods or resources at one price and charging customers enough to cover their costs, time, and a return on their investment. You could also encourage your children to earn their own money by setting up a lemonade or cookie stand.

If you have older children who are looking for more literal answers, the Bureau of Engraving and Printing prints paper currency and the U.S. Mint produces our coins. The Federal Reserve regional banks distribute both.

For more money activities for your child, visit our Money As You Grow section.