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. Barter has a problem. You need to find someone who has what you want and also wants what you have. Barter is slow and hard to arrange, which is why money helped trade.

People have used many things as money, such as gold, feathers, cowrie shells, cattle and cacao beans. Cowrie shells, small white shells, were used as money in many places for thousands of years. They came from the warm waters of the Indian Ocean, near the Maldives, and traveled far by trade. In some places cowrie shells were still used as money until the 1900s.

On the island of Yap, people used huge stone discs as money. Yap stones ranged from a few centimeters to about four meters in size. They were cut from rock on the island of Palau, hundreds of kilometers away, and carried to Yap on rafts. The hard trip added to their value. A Yap stone could stay in one place when it was spent. The stone did not move: it just changed owner. In early Virginia, people used tobacco as money.

Early money was often metal, such as silver, gold and a mix of the two called electrum. Commodity money is money that gets its value from what it is made of, like gold or silver. The ancient Lydians, who lived in what is now Turkey, invented coins. Their first coins were made of electrum, a gold and silver mix found in river beds.

In Tang-dynasty China, merchants used flying money: a paper receipt for money left with local officials that could be redeemed somewhere else, so they did not have to carry heavy strings of coins. Paper money that people could trade with each other began with merchants in Song-dynasty China, around the year 1000. The first paper money made in the American colonies was issued by Massachusetts in 1690, to pay for a military expedition.

In the past, banknotes could be swapped on demand for gold, but today they cannot. U.S. money today is fiat money: it is not tied to gold or any other asset. The Federal Reserve is the central bank of the United States, created by Congress in 1913. It does not print money. The Bureau of Engraving and Printing prints it, and Reserve Banks give it to banks.

The U.S. Secret Service was created in 1865 to stop counterfeit money. Dollar bills are made of cotton and linen, not ordinary paper. Currency is redesigned mainly to stay ahead of counterfeiters. The numeral in the lower right corner of a $100 bill's front shifts from copper to green when you tilt the note.

Money you receive, from jobs, allowances, chores or gifts, is called income. A budget helps you decide how much to spend on needs, how much to put aside for savings and how much to use for wants. Keeping a lot of cash at home is risky because it could be lost or stolen, which is one reason people use banks. In the U.S., the FDIC insures deposits in banks for at least $250,000.

Words to know

• barter: trading things
• cowrie: small white shell
• electrum: gold-silver mix
• counterfeit: fake
• budget: money plan