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What is Money? (History & Uses)

Writer's picture: SmartmoniesSmartmonies
Money is something we use every day to buy things we need and want, like food, clothes, and toys. It also helps us pay for services, such as going to the doctor or taking the bus. But have you ever wondered where money comes from and why we use it?


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A Short History of Money


Before money existed, people used bartering long ago to get what they needed. This meant they would trade goods and services with each other. For example, if someone had too many apples but needed milk, they could trade apples with someone with extra milk. However, bartering wasn't always easy because not everyone wanted what the other person had.
To solve this problem, people started using things like shells, stones, and metals as a way to trade. Eventually, coins made of precious metals such as gold and silver were created because they were easy to carry and had value.
Later, paper money was introduced. This was lighter than coins and made trading even easier. Today, most money is digital, which means people can pay using bank cards, mobile phones, and even online banking.

Types of Money


Today, money comes in different forms:

  1. Coins: Small metal pieces with different values, such as 1p, 2p, 50p, and £1 coins.
  2. Banknotes (Paper, Polymer): Money like £5, £10, or £20 notes.
    In the UK, banknotes are now made from polymer instead of paper. Polymer banknotes are made of a special type of plastic that makes them more durable and resistant to water and tearing. They also have advanced security features like transparent windows and raised print, which help prevent counterfeiting. Polymer banknotes last longer than paper ones and are also more environmentally friendly because they can be recycled.
  3. Digital Money: Money that exists in bank accounts and can be used with cards or online payments.
    Digital money includes debit and credit cards, online banking, and mobile payment apps such as Apple Pay and Google Pay. It allows people to pay for things without using cash. Digital money is convenient because it can be transferred quickly and securely across the world. Online banking services allow users to check their balance, transfer money, and even set up savings goals without visiting a bank. Digital wallets store payment information securely and make shopping online easier. The rise of contactless payments has made it possible to buy things just by tapping a card or phone on a payment terminal. Cryptocurrencies, such as Bitcoin, are also a form of digital money, although they are not widely used for everyday purchases.

Why Do We Use Money?


Money is important because it helps people:

  • Buy things: We can purchase food and clothes with money.
  • Save for the future: Money can be kept in a bank to use later.
  • Pay for services: We can pay for things like transport, school trips, and electricity.
  • Help others: Money can be donated to needy people or charities.

How Does Money Work?


Money works because everyone agrees it has value. The government and banks ensure money is safe and people can trust it to buy and sell things fairly.


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Fun Facts About Money


  • The first known coins were made over 2,500 years ago in ancient Turkey by the Lydians.
  • The world's first paper money was used in China around 600 AD during the Tang Dynasty.
  • The British pound (£) is the world's oldest currency still in use, dating back to the 8th century.
  • British banknotes have special features to prevent counterfeiting, like holograms and watermarks.
  • The first banknotes in Europe were issued in Sweden in the 17th century.
  • In medieval times, people in Europe used tally sticks, which were wooden pieces marked to keep track of debts and payments.
  • In ancient Rome, soldiers were often paid with salt, which is where the word "salary" comes from.

Conclusion


Money is a very useful tool that makes life easier. It has changed a lot over time, from bartering to digital payments, but it still plays an important role in our lives. Learning how to use money wisely can help us make smart choices now and in the future.

Book a Smartmonies lesson today and help your child begin building essential financial skills! Get £10 off with the code SMARTSAVER

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