What's your favorite time of year? For many kids, the answer is Christmas. It's the time of year when good little boys and girls receive presents they've been wanting all year long.
But why wait until Christmas? If you want that new bike, skateboard, doll, or tablet computer, why don't you just buy it? If you're like most kids, the answer probably has something to do with a little thing we call money.
Before we take a closer look at where money came from, let's first figure out exactly what money is. Of course, when you think of money, you probably think of dollar bills and coins, such as nickels, dimes, and quarters. But is that all money is?
Economists define money as anything commonly accepted by people for the exchange of goods and services. Although every country has its own system of coins and paper money, other things can also often be used as money.
For example, farmers may barter with each other, trading a certain number of animals for certain products or services. In that case, animals would be used as money!
In fact, bartering was the way people exchanged goods and services from the earliest days of human beings on Earth. If you grew rice, for example, you could trade bags of rice for the other goods and services you needed.
Over time, though, bartering wasn't always possible. Sometimes people couldn't agree on what goods were worth in exchanges. In other situations, people simply might not want to trade for what you had available. These situations led to the development of commodity money.
Commodities are basic items used by almost everyone. In the past, popular commodities included salt, tea, cattle, and seeds. Using these items of money alleviated some of the problems of bartering. However, using commodities raised other problems. Commodities weren't always easy to transport and often they were perishable or difficult to store.
These issues with commodities led people to create coins out of precious metals to use as money. No one knows for sure who first invented such money, but historians believe metal objects were first used as money as early as 5,000 B.C.
Around 700 B.C., the Lydians became the first Western culture to make coins. Other countries and civilizations soon began to mint their own coins with specific values. Using coins with set values made it easier to compare values and trade money for goods and services.
Eventually, societies moved away from using precious metals to make money. Known as representative money, the new paper bills and coins made of non-precious metals represented certain values that everyone in those societies could agree upon. Governments or banks would promise to exchange representative money for a specific amount of silver or gold.
Today, most modern currency is not backed by silver or gold. Instead, today's money is known as fiat money. Fiat is a Latin word that means “let it be done." Money has a certain value today because it was given that value by government fiat or decree. Legal tender laws now make it illegal to refuse legal currency in favor of some other form of payment.
The first paper money issued in the United States occurred on March 10, 1862. The $5, $10, and $20 bills issued were made legal tender by an act of Congress on March 17, 1862.
FAQs
Historians generally agree that the Lydians were the first to make coins. However, in recent years, Chinese archaeologists have uncovered evidence of a coin production mint located in China's Henan Province thought to date to 640 B.C. In 600 B.C., Lydia began minting coins widely used for trading.
Who invented the first form of money? ›
No one knows for sure who first invented such money, but historians believe metal objects were first used as money as early as 5,000 B.C. Around 700 B.C., the Lydians became the first Western culture to make coins. Other countries and civilizations soon began to mint their own coins with specific values.
Who started the concept of money? ›
When was money invented? The earliest evidence of money comes from around 3,000 BC in ancient Mesopotamia (modern-day Middle East). Citizens would draw agricultural symbols on clay tablets to represent debts.
How did money start in the world? ›
People bartered before the world began using money. The world's oldest known coin minting site was located in China, which began striking spade coins sometime around 640 BCE. Since then, the world adopted banknotes and moved into digital forms of payment, including virtual currencies.
Who invented paper money? ›
The first known banknote was first developed in China during the Tang and Song dynasties, starting in the 7th century. Its roots were in merchant receipts of deposit during the Tang dynasty (618–907), as merchants and wholesalers desired to avoid the heavy bulk of copper coinage in large commercial transactions.
Who originally made money? ›
Historians generally agree that the Lydians were the first to make coins. However, in recent years, Chinese archaeologists have uncovered evidence of a coin production mint located in China's Henan Province thought to date to 640 B.C. In 600 B.C., Lydia began minting coins widely used for trading.
Who invented the dollar? ›
Congress acted on Hamilton's recommendations, with the Coinage Act of 1792 that established the dollar as the basic unit of account for the United States. The United States Mint was created by Congress following the passing of the Coinage Act. It was primarily tasked with producing and circulating coinage.
What did people use before money? ›
Before the creation of money, exchange took place in the form of barter, where people traded to get the goods and services they wanted. Two people, each having something the other wanted, would agree to trade one another. In economics, we call this a double coincidence of wants.
What is the oldest currency still in use? ›
Pound sterling
- Sterling (ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. ...
- Sterling is the world's oldest currency that is still in use and that has been in continuous use since its inception.
Paper currency in the United States is born, issued by the Massachusetts Bay Colony to fund military expeditions. Other colonies quickly take up the practice of issuing paper notes.
If there were no money, we would be reduced to a barter economy. Every item someone wanted to purchase would have to be exchanged for something that person could provide. For example, a person who specialized in fixing cars and needed to trade for food would have to find a farmer with a broken car.
Why did money have to be invented? ›
There are many theories about the origin of money, in part because money has many functions: It facilitates exchange as a measure of value; it brings diverse societies together by enabling gift-giving and reciprocity; it perpetuates social hierarchies; and finally, it is a medium of state power.
What is the highest currency in the world? ›
The Kuwaiti Dinar (KWD), recognized as the highest-valued currency globally, symbolizes Kuwait's economic strength.
What did the US use before the dollar? ›
Continental currency. After the American Revolutionary War began in 1775, the Continental Congress began issuing paper money known as Continental currency, or Continentals.
Who creates money? ›
Money creation, or money issuance, is the process by which the money supply of a country, or an economic or monetary region, is increased. In most modern economies, money is created by both central banks and commercial banks.
What if money didn't exist? ›
Without money society might learn to be happier with less, maybe “with less fortunes, there would be fewer less fortunates”. If all the money in the world disappeared, society would be given a chance to rebuild itself, possibly being the solution to various problems.
Who originally wrote money? ›
"Money (That's What I Want)" is a rhythm and blues song written by Tamla founder Berry Gordy and Janie Bradford, which was the first hit record for Gordy's Motown enterprise. Barrett Strong recorded it in 1959 as a single for the Tamla label, distributed nationally on Anna Records.
What is the world's oldest currency? ›
The British pound is the world's oldest currency still in use at around 1,200 years old. Dating back to Anglo-Saxon times, the pound has gone through many changes before evolving into the currency we recognise today. The British pound is both the oldest and one of the most traded currencies in the world.
Who first used the word money? ›
The English word money first appeared in the 14th century. It was derived from the Latin word moneta, a name given to the Roman goddess Juno, at or near whose temple the Romans first began minting coins around 300 BCE.
Who created the money bill? ›
Money Bill can be introduced only on the recommendation of the President. Only a Minister is allowed to introduce Money Bill in the Parliament. Money Bill requires the certification of the Lok Sabha Speaker when transmitted to Rajya Sabha.
