From Bartering to Coins – How Money got Started

Hi Girls, it’s GirlMogul Lily here with more of your financial Literacy lessons. I am still working on tracking my spending for next week – are you doing it to?

In the meantime I thought I would do a follow up on the history of money lesson we were talking about last time. Last time we learned about bartering – before there was money to exchange, people traded actual goods with one another to get what they wanted. As we saw this method could get pretty complicated and there was no guarantee that you were going to get what you really wanted.

As communities grew and people started traveling and trading outside of their own little towns, it soon became apparent that they needed a better way to make exchanges. And so entered the idea of currency. But no one was using coins or dollars yet. The first currency was actually: grain! Also known as commodities, people started to use grain as a way of standardizing prices. A shoemaker would accept some barley in trade for some shoes and could then use some of it to go buy fruit from the fruit vendor. Since everyone was “paying” with barley, prices could become more standard and it was easier to judge what something was worth.

Of course there were problems with using something like grain – it could spoil and lose its value. If there was a bad harvest, there would be little grain to spare as money – most would have to be kept to use as seed for next year’s planning. And of course, it’s not very portable.

So at some point it was decided something else was needed. No one is sure exactly when, but shells were the first form of popular money. In ancient China the cowrie shell was used. In America, the Native Americans used wampum, or beads made out of shells to make money. Though shells were relatively easy to find, it took a long time to make them into the beads – therefore they had a high value.

After shells came gold and silver. Gold and silver, since they are mined from the ground were long considered valuable and it wasn’t long before governments began to use them to make coins. The coins weren’t always round to begin with – they were lumps of metal that needed to be weighed to determine their value each time they were used. After awhile people got tired of that and started to mark the weight on the coins so that everyone would know what each lump was worth. It wasn’t long before kings and emperors got in on the game and started stamping their pictured on coins. All of this made the coins more recognizable and efficient.

Of course since coins were made of the actual precious metals, there was no doubt about their value. However, paying for big things with coins got to be pretty cumbersome. Enter the next big leap forward for money – Paper. But, how can a piece of paper be worth the same as a coin made of gold – after all – paper is just paper. So we’ll take mor about that next time. Have a great weekend girls!
Posted by GirlMogul Lily

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