Bank at School - Lesson 1 Next Lesson
What Is Money?
Introduction
The first lesson introduces students to the concept of money as a medium of exchange. The lesson will also explore the history of money.
Objective
Draw student's attention away from money as a power or status symbol and focus their attention on its basic role as a medium of exchange. Raise student awareness of their own ideas and attitudes about money.
Lesson Material
Today in the U.S. we are literally surrounded by images or references to money.
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People sing about money. (Teachers: You might want to play a popular song which refers to money.)
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People talk about money on T.V. (Can you name examples?).
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We read about money (stock market action, consumer confidence).
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There are even movies about money (Mo Money, Wall Street, etc.).
We will explore why there is so much importance attached to money, and discuss how we can make sure we use our money wisely. Having money means making choices. But, let's first take a quick look at how money as we know it began.
The Story of Money
What is money? Money is anything that is commonly accepted by a group of people for the exchange of goods or services. The system of coins and paper currency we use in the U. S. exists to enable people to obtain the goods and services they need in a convenient way. A simple definition for money is: money is a medium of exchange.
The uniform system of paper dollars and coins we use in America today is less than 100 years old. Today we can go to any city or state in the country and pay for whatever we may want or need, and our money will be recognized and accepted as easily as it is when we shop in our neighborhood. U.S. dollars are even accepted in some foreign countries. But this wasn't always the case. Our present system of money is a recent phenomenon. For thousands of years people didn't even use money. People used a system called barter.
What is barter? Barter is the exchange of a good or service for another good or service. Sound complicated? Well, it's not really. Most people have bartered at some time. For instance, have you ever exchanged something you didn't want in your lunch for something you liked in someone else's? That's bartering.
For centuries, barter was the principal medium of exchange all over the world. Neighbors bartered with each other. People from other tribes or countries bartered, too. However, bartering became increasingly complicated. For example, say a fisherman needed a fishing net and was prepared to offer a bucket of fish as payment. He would need to find someone with a fishing net who was willing to accept fish as payment. But what if no one wanted fish? What if they would only trade for needles? Imagine how complicated it might be to obtain a lamp, some bread and a pair of shoes if no one accepted the same item as payment. Many times people would trade for things they did not want in the hopes they could later exchange it for something they did want.
As nations developed and people began to see the need for some common medium of exchange, commodity money came into existence. A commodity is a basic item used by almost everyone. Salt, tea, tobacco, cattle, and seeds are some of the items that were used as money. Trade was easier since most everyone needed or wanted these items.
Still, there were problems; to serve as a medium of exchange an item has to have a clear measurement of worth. Using commodities as money still required having to figure out how much salt a table or any other item was worth. In addition, having to carry bags and bags of salt was very tiring.
Coins were introduced as money around 5000 B.C. By 700 B.C. countries were minting their own series of coins with specific values. Metal was the material of choice because it was readily available, easy to work with and could be recycled. Using coins as money was a fantastic idea. Because each coin was given a certain value, it became easier for people to compare the cost of the items they needed (in other words, "comparison shop"). Nonetheless, over time difficulties arose. Coins were easier to carry around than salt, but if you needed to carry a fair amount of money, coins were heavy, too (imagine the weight of a trunk full of coins). Over time, people looked for another choice and discovered paper. Some of the earliest known paper money dates back to 1300 AD.
In America, the early settlers often bartered or used commodity money. As states evolved paper money became more prevalent. After the American Revolution the number of new states escalated. Soon, many states began circulating their own currency. After the Civil War, a new monetary system was established. A United States Treasury was created in 1877 to supply a uniform currency to all the states in the land. The present system of currency as we know it was born.
Suggested Activity
Suggested Homework
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Bring in newspaper articles which discuss money issues.
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Write a brief description of t.v. programs which discuss money, or sell items.
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Interview family members to see whether they have bartered recently for goods or services.
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Read the Federal Reserve Bank comic book on the history of money.
Glossary
Money - any item that is commonly accepted by a group of people for the exchange of goods and services.
Barter - to trade goods or services for other goods or services without exchanging money.
Currency - the various paper and coin instruments in circulation.
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