Money is something people use to buy things. Sellers agree to take it in exchange for what they sell. Before money, people used barter. Barter means trading things you have for things you want, with no money. But barter has a problem. You need to find someone who has what you want. That person must also want what you have.

Barter is slow and hard to arrange. That is why money helped trade. Money has to do three jobs. It is a medium of exchange, a store of value and a unit of account. A unit of account lets people measure and compare the value of goods and services. A store of value means money can be kept and still be worth about the same later.

People have used many things as money. They include gold, feathers, cowrie shells, cattle and cacao beans. Cowrie shells are small white shells. People used them as money in many places for thousands of years. On the island of Yap, people used huge stone discs as money. Commodity money is money that gets its value from what it is made of, like gold or silver.

Early money was often metal, such as silver, gold and a mix of the two called electrum. The ancient Lydians lived in what is now Turkey. They invented coins. Their first coins were made of electrum. That is a gold and silver mix found in river beds. To make a coin, a mint cuts coin-shaped pieces of metal called blanks. Then it strikes each blank between engraved dies to stamp on the design.

People in China made the first paper money, about a thousand years ago. Dollar bills are made of cotton and linen, not ordinary paper. Real bills have hidden features. One is a watermark you see when you hold the bill up to the light. Currency is redesigned mainly to stay ahead of counterfeiters.

Money you receive is called income. It can come from jobs, allowances, chores or gifts. A wage is money an employer pays a worker for the work they do. Some workers are paid by the hour. A budget is a plan for managing the money you get and spend and save over a period of time.

When you get money, you can decide how much to put in each of three jars. The jars are for spending, sharing and saving. An emergency is an expense that comes up unexpectedly. It is very important and needs attention right away. That is one reason people save.

A bank is a safe place to keep money, so it will not be lost or stolen. Savings can be kept in a secure place, such as a bank account. They can be used later for emergencies or to buy something specific. Say you want to buy something but do not have the money yet. You can save until you have enough.

Words to know

• barter: trading things
• electrum: gold-silver mix
• mint: coin factory
• income: money you receive
• budget: money plan

The short version

Money is something people use to buy things: sellers agree to take it in exchange for what they sell. Before money, people used barter, which means trading things you have for things you want, with no money. Money has to do three jobs: it is a medium of exchange, a store of value and a unit of account.

Quick facts

• Money is something people use to buy things, and sellers agree to take it in exchange for what they sell.
• Barter has a problem: you need to find someone who has what you want and also wants what you have.
• The ancient Lydians, who lived in what is now Turkey, invented coins.
• People in China made the first paper money, about a thousand years ago.
• Dollar bills are made of cotton and linen, not ordinary paper.