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
The first metal coins date back to the 7th century BCE in Lydia (modern Turkey) and China. In China, metal coins were made of bronze and shaped like farming tools. In Lydia, coins were made of an alloy of gold and silver called electrum. Lydian staters were the first coins to be officially issued by a government body.
Who made the first money? ›
The first metal coins date back to the 7th century BCE in Lydia (modern Turkey) and China. In China, metal coins were made of bronze and shaped like farming tools. In Lydia, coins were made of an alloy of gold and silver called electrum. Lydian staters were the first coins to be officially issued by a government body.
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.
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.
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 paper currency? ›
Paper currency first developed in Tang dynasty China during the 7th century, where it was called "'flying money'", although true paper money did not appear until the 11th century, during the Song dynasty. The use of paper currency later spread throughout the Mongol Empire or Yuan dynasty China.
What is the oldest currency in the world? ›
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.
When did humans start money? ›
Money has been part of human history for at least the past 5,000 years in some form or another. Historians generally agree that a system of bartering was likely used before this time. Bartering involves the direct trade of goods and services.
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.
Who came up with the idea to make 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.
However, in 1775, when the Revolutionary War became inevitable, the Continental Congress authorized the issuance of currency to finance the conflict. Paul Revere made the first plates for this "Continental Currency." Those notes were redeemable in Spanish Milled Dollars.
Who created new money? ›
In most modern economies, money is created by both central banks and commercial banks. Money issued by central banks is a liability, typically called reserve deposits, and is only available for use by central bank account holders, which are generally large commercial banks and foreign central banks.
Why does money smell? ›
“From the smell of the paper they are made of to the scent of fingerprints or ink.” The olfactory pyramid of this 'scent of money' starts with the olfactory notes of a banknote that has just left the Mint “and then moves on to more 'iridescent' and woody notes reminiscent of the smell of old banknotes.”
Will money exist forever? ›
As people move toward more electronic or digital forms of payment, it might seem like paper money is on its way toward obsolescence. But experts say that cash will always be around.
Why did we invent money? ›
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.
Who controls your money? ›
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.
Who runs our money? ›
The Federal Reserve System, commonly known as the Fed, is the central bank of the U.S., which regulates the U.S. monetary and financial system. The Federal Open Market Committee is the branch of the Federal Reserve System that determines the direction of monetary policy.
Who invented paying bills? ›
Who invented bills? The Paper Bill was first developed back in Ancient China during the Tang Dynasty(618–907 AD). However they didn't use it primarily as it was costly and time consuming. Paper currency began circulation during the Song Dynasty.
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 is on the $100 dollar bill? ›
The $100 note features a portrait of Benjamin Franklin on the front of the note.
Early Turkish Currency: Lydian Stater Coins
This currency is commonly considered the first minted — or state-produced — coin, issued by King Alyattes in the 7th century B.C. in an area that's now part of the nation of Turkey. These Lydian coins are made of electrum, a naturally occurring gold and silver alloy.
What is the oldest dollar bill? ›
The design, featuring George Washington on the face and the Great Seal on the back, has not changed. The first $1 notes (called United States Notes or "Legal Tenders") were issued by the federal government in 1862 and featured a portrait of Secretary of the Treasury Salmon P.
What is the world's newest currency? ›
Zimbabwe's ZiG is the world's newest currency. AP News.
What was the most powerful type of money? ›
1. Kuwaiti dinar. The Kuwaiti dinar (KWD) is the world's strongest currency, and this is for a number of reasons. For starters, Kuwait has one of the largest oil reserves in the world.
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.
What is the oldest coin? ›
The Oldest Coin in the World
According to different scholars, the Lydian stater is considered the world's oldest coin still around. Made of a mix of gold and silver called electrum, these early coins were minted around 600 BCE in the kingdom of Lydia in the modern country of Turkey.
