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If there are not monsters hiding under your kid's bed, what is? If it's where everything gets shoved when it needs to hide, it's no wonder your little one is afraid of what's under there! Under-the-bed space is best use to store those items that can be stored flat, and that you need to get to only rarely.
Look for shallow plastic bins, and use them to store extra bedding, artwork, and off-season clothes. If you can find bins with casters, you'll be able to slide these items out from and back under the bed with very little effort.