Money makes the world go round, they say, but what is money? What do you imagine when you hear this word? Bills, coins? What do they look like, what are they made of, and how do they work?
Let’s start from the very beginning.
How does money work?
Let’s imagine you have a cake, and your friend John has 10 muffins. How do you exchange? Is it enough to trade one cake for 10 smaller things? Will your friend John agree to exchange at all? What if he doesn’t like cake?
As you can see, trading one thing for the other can be quite difficult, since all people are different, have their own preferences and understanding of what is valuable and what is not. So, in this case, we need something that will not depend on other people’s opinions - something that we all collectively agree on and assign a certain value to.
So, from now on, you and your friend John can create your own money. Let’s say you agree that one coin equals:
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half of the cake;
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4 muffins;
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1 teddy bear;
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and so on.
Where does the money come from?
Money, as people say, indeed doesn’t grow on trees. The government of each country carefully calculates how much money is necessary to keep all the processes going and lets the Central Bank know exactly how many bills will be printed and how many coins should be issued.
You can call all that money ‘currency’. US dollars, British pounds, Japanese yen, Mexican pesos, and so much more - these are all currencies.
Why does every country need its own currency?
Currency is something that shows how developed the country is. For example, if you take the smallest coin from every currency you can find, it doesn’t mean that you can buy the same things with those coins. Some of them can buy you less, some more - but why is that?
Depending on how influential a country is, what exactly happens with it, what relationship it has with other countries and many more factors, the currency of this exact country can be more expensive than the currencies of others.
If you are friends with many other kids and have a lot to share, the chances are that others will gladly exchange toys or snacks with you and even give you some extra.
What can money buy?
You can exchange money for a lot of things:
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Things like clothes, books, electronics, cars - any object you can touch
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Time, knowledge, skills - that’s what they pay you money for when you are working!
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Other country’s money - you can buy currencies of different countries (that’s what Forex is)
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Fun activities: going to movies, fairs, festivals, theme parks
Money is not the only solution to any problem, but it definitely can make your life easier and help people exchange anything and everything even easier.
Why can’t we print more money?
It’s a tricky question!
Imagine you have a huge pile of money - you have so much you can buy anything in the world! Of course, you would want to go shopping and buy anything and everything.
But what if all the people in the world also got as much money as you? It would be unfair to exchange things for the old price - now that everyone is rich.
The toy you could have bought for $10 now costs $10,000! And the same happens with all the prices. So printing more money would not change anything - just make it more complicated to count.
Some interesting trivia:
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Money has been used since more than 3,000 years ago
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The first paper money was invented in China
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The largest paper bill is a 100,000 peso note from the Philippines. It’s bigger than an average book page!
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Most currencies have nicknames. Here are just some of them:
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Euro – Fiber
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Swiss Franc – Swissy
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Canadian Dollar – Loonie
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Australian Dollar – Aussie
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New Zealand Dollar – Kiwi
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Norwegian Krone – Noki
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Swedish Krona – Stoki
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There are over 170 currencies in the world as of today
The world of money and finance is a fascinating thing, so here’s a challenge for you to explore. Print it out, fill out the blanks to remember all the important facts, and learn something new!
