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
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 invented money for kids? ›
In the 600s bce the kingdom of Lydia in what is now Turkey began to make coins. It was probably the first government to do so. These coins were a combination of silver and gold, called electrum. Many ancient peoples, including the Greeks and the Romans, also used coins.
Who is the owner of money? ›
Since property is an enjoyment protected by law, it is as such the enjoyment of two goods: the good which is an object of law and the law itself which satisfies the need of legal certainty. This means that a person is not only the owner of money but he has also the right to claim it.
Who invented bills? ›
The first banknote-type instrument was used in China in the 7th century, during the Tang dynasty (618–907). Merchants would issue what are today called promissory notes in the form of receipts of deposit to wholesalers to avoid using 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.
Who creates money? ›
Banks create money by lending excess reserves to consumers and businesses. This, in turn, ultimately adds more to money in circulation as funds are deposited and loaned again. The Fed does not actually print money. This is handled by the Treasury Department's Bureau of Engraving and Printing.
Who created new money? ›
In most modern economies, money is created by both central banks and commercial banks. Money issued by central banks is termed reserve deposits and is only available for use by central bank account holders, which are generally large commercial banks and foreign central banks.
Who made the first coins? ›
Coins were introduced as a method of payment around the 6th or 5th century BCE. The invention of coins is still shrouded in mystery: According to Herodotus (I, 94), coins were first minted by the Lydians, while Aristotle claims that the first coins were minted by Demodike of Kyrme, the wife of King Midas of Phrygia.
Is God the owner of money? ›
Instead, it emphasizes that everything ultimately belongs to God: "The earth is the Lord's, and everything in it" (Psalm 24:1). Scripture on stewardship of money clarifies that God is the owner of everything. In fact, He owns people themselves – not just their possessions!
Just as Congress and the president control fiscal policy, the Federal Reserve System dominates monetary policy, the control of the supply and cost of money.
Why does money exist? ›
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.
Is a $2 bill worth $5000? ›
Although $2 bills are rare to find, if you own one, there's a chance it has a high value. Based on specific factors, some versions of the currency may be worth up to $5,000, per the US Currency Price Guide. FOX 13 Tampa reported that these bills were discontinued by 1966 but brought back 10 years later.
Who drew the $100 bill? ›
The bills are also commonly referred to as "Bens", "Benjamins", or "Franklins", in reference to the use of Benjamin Franklin's portrait by the French painter Joseph Duplessis on the denomination, as "C-Notes" or "Century Notes", based on the Roman numeral for 100, or as "blue faces", based on the blue tint of ...
Who is on the $10,000 dollar bill? ›
Just as this $10,000 bill, produced in 1918, is rare, the likeness on the front might be unfamiliar. It shows Salmon P. Chase, who served as President Lincoln's Secretary of the Treasury from 1861 to 1864.
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.
Which country used paper money first? ›
The Chinese issued the world's first paper money
This early paper money was in use when Marco Polo visited Kublai Khan in the 13th century. The note, called a kua, is the equivalent of 100 coins and dates from the Ming Dynasty, A.D. 1368–99.
