First of all I suggest that you use the option on the iPod to Forget This Network and then re-establish the connection.
To do this, go into the iPod's Settings/Wi-Fi menu, tap the i icon (in the circle) which is next to your Wi-Fi's name and then tap Forget This Network. That router will now appear on your list of available networks.
Then select the Wi-Fi router from the list of available networks and set up the connection again.
If you continue you see the message that the password is incorrect, that suggests that it is incorrect. Make sure that you are using the correct one (have you changed the default password on the router perhaps?) and that you are using the correct lower and upper case, because it will be case-sensitive.