History Courses/Social Studies for KidsCourse
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InstructorDavid WilsonShow bio
David has taught college history and holds an MA in history.
Modern money is typically in the form of paper notes or metal coins, but this was not always the case. Follow the history of money transactions from trading, silver and gold, and paper money to modern uses of electronic and digital currency.Updated: 06/28/2023
Table of Contents
- Trading
- Silver and Gold
- Paper Money
- The End of Money
- Lesson Summary
When was the last time you bought a candy bar or a can of soda? Imagine if money didn't exist and you had to trade for a snack instead of buying it with dollars. You'd have to find out what the store owner wanted, like gasoline for their car or a new jacket, then find a way to trade for those items as well.
Our money serves as a replacement so that nobody has to trade for what they want. In the U.S., we use dollars and cents for our money.
The use of money dates back thousands of years. About 3,000 years ago, China developed the use of miniature metals as a system of trade. At first, they created small symbols out of bronze, which is a mix of copper and tin metal. For instance, you could trade a bronze symbol of a shovel for a real shovel. Eventually their symbols became circles, creating the first coins.
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Around 2,500 years ago, other places outside of China began creating coins out of precious metals. Some of the first silver and gold coins in history appeared in Turkey and Greece around 500 BC. Since silver and gold are both rare, these coins had a lot of value. Only the richest people living in the ancient world would have had gold coins.
Kings stamped their faces on coins so that everyone would know the coin was not a counterfeit, meaning a fake. The first values of coins were also set down. For instance, we know that a Greek silver obol coin could buy a loaf of bread, while a nice pair of shoes would cost about ten larger drachma coins.
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When the Italian explorer Marco Polo traveled all the way across Asia to reach China in the 1200s, he found a crazy sight. People paid for everything using paper money! China had moved on from heavy coins made of metal to light paper.
Our dollars today say 'In God We Trust', but the paper cash that Marco Polo saw said 'Counterfeiters Will Be Beheaded.' Marco Polo brought the idea back to Europe, but it wasn't until 400 years later that paper money became popular.
Banks began issuing pieces of paper promising coins instead of coins themselves. This led to the development of credit, which means borrowing money with the promise to pay it back.
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Paper cash remains popular today, but new technology has began to make it even easier to spend money. Credit cards, invented in the 1950s, became very popular.
All you need to do is swipe a credit card, and the merchant will notify the bank. The bank pays the merchant for you and sends you a bill at the end of the month. Then you pay the bank back.
Smart phones make it possible to use an app that pays for something with the tap of a finger. The rise of Bitcoin, a type of Internet cash, has made it possible to buy products without any actual dollars.
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Alright, let's review what we've learned. Coins made from rare gold and silver were the standard type of money for hundreds of years, using things like bronze, which is a mix of copper and tin metal.
Paper money, first invented by the Chinese, became popular more recently. As technology improves our lives, people use money less and less because they can quickly pay for things with a credit card or a smart phone, credit being the act of borrowing money with the promise of paying it back.
Money is easy to take for granted, since so much of our lives is based around it. But now, you should have a better idea of where the concept of money came from and how it works.
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