Hi Girls, it’s Lily and here’s my next installment of my FLL (Financial Literacy Lesson). Last time we talked about how people went from using coins made out of precious metal like silver and gold and started to use things like paper money instead. Now a dollar is a dollar, is a dollar, right? Well not exactly. As it turns out money, while it may have the same denomination (number) on it, it won’t always buy the same thing.
Imagine your were traveling and stopped someplace warm where everyone grew oranges in their backyard. You love oranges, so you take out a gold coin and are able to buy a whole BIG bag of oranges because there are so many of them. Now, imagine you keep traveling and wind up someplace cold where there are no orange trees, and all of the oranges have to be shipped from a warm place. Still, you want an orange, so you take out another gold coin, identical to the one you used before and go to buy oranges. You expect that you’ll be able buy a big bag of oranges. But nope, because oranges are scarce and have to travel a long distance, an orange is pretty expensive. Your gold coin might only buy one measly orange here. You’ll have to decide if you really want the orange so badly you’ll spend a whole gold coin on it, or if you’ll save it and buy something else.
See in different places, the same amount of money has different buying power – it may buy more or less depending on what’s easily available. Anyway, I thought it was kind of cool.