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An introduction to the history and purpose of money as a tool for trading.
Imagine you want a new comic book, but all you have to trade is a giant bag of stinky onions. What if the shopkeeper hates onions? How would you get your book?
Long ago, before money existed, people used bartering. Bartering means trading one thing directly for another. If you had extra milk and needed eggs, you had to find someone who had extra eggs and wanted your milk! This was called a 'double coincidence of wants.' But bartering was hard. What if your milk went sour before you found a trader? Or what if you wanted a horse, but the horse owner didn't want your baskets of apples? People needed a better way to trade fairly and easily.
Quick Check
What is the main problem with bartering for something you want?
Answer
You have to find someone who has what you want AND wants exactly what you have to trade.
Money is an item that everyone agrees has value. We use it as a 'medium of exchange,' which is just a fancy way of saying it's a tool for trading. Instead of carrying heavy cows or bags of salt to the store, we use currency. In the United States, our currency comes in two main forms: coins (made of metal) and bills (made of special paper). Money is great because it doesn't spoil like milk, it's easy to carry in your pocket, and everyone is happy to accept it!
Let's look at the basic forms of money we use every day:
1. Coins: The Penny ($\$0.01\), Dime ($\$0.10\).
2. Bills: The $\$1\ bill, $\$10\ bill.
3. Each piece of money has a specific value printed on it so we know exactly how much it is worth.
Quick Check
Why is money easier to use than bartering with food?
Answer
Money doesn't spoil, it is easy to carry, and everyone agrees on its value.
Not all money is the same! The value of money tells us how much 'buying power' it has. A $\$10\ bill. This means you can buy more things (or more expensive things) with the $\$10\ and you have five $\$1.00\ bills, you would have , so you couldn't buy it yet.
Imagine you are at the school store:
1. An eraser costs cents ($\$0.502\).
3. You have quarters. Since , you have exactly enough for the eraser, but not the pen!
Scenario: Sam has a soccer ball but wants a skateboard. Lily has a skateboard but wants a video game. Max has a video game but wants a soccer ball.
1. Without money, Sam has to find Max, trade the ball for the game, then take the game to Lily to finally get the skateboard.
2. With money, Sam simply sells his ball to Max for $\$10\ to buy the skateboard from Lily. Money makes the trade much faster!
What is it called when you trade a baseball card for a bag of chips without using money?
Which of these has the HIGHEST value?
Money is useful because it is easy to carry and everyone agrees on what it is worth.
Review Tomorrow
Tomorrow, try to explain to a family member why it would be hard to buy groceries if we had to use bartering instead of money.
Practice Activity
Next time you see a coin or a bill, look for the number on it that tells you its value!