You probably know about money. Maybe you have a piggy bank full of coins or a stack of paper money saved from birthday cards. But the history of money and how we use it today is more complex than you might realize! Check out this history of money for kids to learn more.
Why Do We Have Money?
A long time ago, people didn’t have or use money. Instead, they traded stuff with each other. Someone who had chickens might trade eggs with other people to get things they needed, such as fabric for making clothing. This is a system known as “barter.”
But barter—the exchange of goods to help everyone get different things—doesn’t always work well. It can be time consuming to trade items around until everyone has what they need, and it’s not always physically easy. Some items are easier to carry, store and trade than others.
Eventually, people discovered that it would be easier to trade something in place of the actual stuff. They invented money, which was made of something easy to carry. The money had a certain agreed-upon value and could be traded for items of worth such as food, clothes or tools.
When Was Money Invented?
The idea of money dates back centuries. Very early on, and in many cultures around the world, money was made of whatever might be available. For example, the Mayans and Aztecs used the cocoa bean as currency. (“Currency” is another word for money.)
The first official coins were made around 600 B.C. in Ancient Greece. Before that, money typically took the form of objects such as shells, grains or beads. Other areas began to make their own versions of coins, which often had images on them that were a point of local pride.
Eventually, coins became associated with nations and governments. For example, the Romans minted coins with images of its emperors. (“To mint” means to make coins.)
The Chinese may have been the first to create paper money. In the 7th century A.D., merchants in China started to use money to represent how much copper coin money they had. They would deposit the coins with other merchants, and those merchants would give them a paper certificate for the amount of coin.
The paper was easier to carry when people were traveling or making large payments to others. People with the paper could then collect the coin if desired. This system lasted around 200 years. A copper shortage and other issues caused the Chinese people to switch to paper money that was based on gold at that time.
Paper money hasn’t always been made of paper. It’s been made of a variety of materials, including different types of cloth and leather.
Money in America
The history of money in America is as long as the history of America itself. Prior to the Declaration of Independence, the American colonists used various forms of money, typically British in nature. But in 1776, the Continental Congress of the United States approved the issue of $2 notes.
Those $2 notes were called Continentals and were the first official paper money of the United States. They’re actually older than the country because the Continental Congress approved them days before it declared independence and more than a month before the Declaration of Independence was signed by all the members.
Loose Change and Banknotes
Today, we still use banknotes—that’s paper money—and coins. Common denominations include:
- Pennies, which are coins worth 1 cent
- Nickels, which are coins worth 5 cents
- Dimes, which are coins worth 10 cents
- Quarters, which are coins worth 25 cents
- $1 bills
- $5 bills
- $10 bills
- $20 bills
- $50 bills
- $100 bills
Less common are coins worth 50 cents and $1, though they’re still in circulation. The United States used to make paper bills worth $500, $1,000, $5,000 and even $10,000, but these large-value bills are no longer printed.
However, any legitimate money printed since 1861 in the nation is still considered valid legal tender. That means if you find a legitimate $500 bill printed years ago, it’s still worth $500.
Today, however, most money that people use isn’t coin or paper. It exists electronically in various accounts. People use credit and debit cards to pay for things with this money rather than cash.
U.S. Department of the Treasury
The U.S. Department of the Treasury is a financial management agency of the country. It handles a variety of tasks, including collecting taxes, paying the nation’s bills and managing currency. There are a number of agencies under the U.S. Department of Treasury, including the Mint.
The United States Mint is the organization responsible for printing paper money and making coins. In addition to making the money supply for the country, the Mint also makes collector’s editions of coins.
When Was Credit Invented? And What Is It?
Credit is a way people can pay for things when they don’t have the cash to do so right away. Instead of using their own money to make the purchase, they borrow the money from someone else.
If you use credit to pay for something, you eventually have to give the money back to the person you borrowed it from. It’s a little like taking a book out from the library. When you do that, you have an agreement with the library—you keep the book for a certain amount of time, and then you return it. If you don’t hold up your end of the deal, you might have to pay a library fine.
Credit works in the same way. Someone borrows money from someone else, or a business like a bank. The bank agrees to let the person use that money for a period of time. The person agrees to pay the money back with interest—that’s the amount you pay for the privilege of using the money. If the person doesn’t pay the money back as agreed, they might have to pay more money in the form of fines—just like you might have to pay a library fine.
If someone is always taking library books out and not returning them or tearing them up, eventually the library might stop letting them have books. Similarly, banks and other lenders might stop letting people borrow money if they don’t pay their loans back correctly. Lenders check to see if someone is likely to pay money back by checking the person’s credit score. A credit score is like a grade you get on how trustworthy you are when it comes to borrowing money.
It’s never too early to start showing you’re trustworthy with money and learning about credit and finances. Reach out to people you know, such as parents or teachers, to get help—and consider asking if you can start managing your money via a savings account at the bank so you can practice investing and using money wisely.