We have always been worried about our kids learning the right spending habits. But have we ensured they understand the history of it as well?
Be it the tinkling coins or the soft hues of the new currency, money has never seized to allure us, ruling almost every aspect of our lives. Ever wondered how it all began? Exchange of goods for gold or cattle, copper coins and the glittery gold pennies for the Royals, metallic coins and then crisp paper notes; money has witnessed an illustrious journey.
We take a look at the century-long evolution of the monetary system and what the future holds in store.
1. Barter System
At the onsets of civilization, needs of people were limited and so were the business transactions. The ideal way of business was an exchange of goods such as grains and cattle for commodities they lacked. Prevalent in 9000 BC, the barter system helped people exchange one commodity for another. This, however, caused difficulties, given the lack of a common value of the measurement.
2. Commodity Money
1100 BC saw people using only specific items such as salt, leather, tobacco, goats, animal-hides, slaves, etc., as a medium of exchange. Ancient China, Africa, and India used cowry shells as well. Though these served the basic functions, the volume of trade remained limited, resulting from transportation issues. Also, such modes complicated the borrowing, lending and measuring of actual values.
3. Metallic Money
The discovery of metal and its virtues like divisibility, ease of transportation and storage; triggered its exchange in different forms. The initial years had gold, silver, and bronze be used in their natural state, which was later transformed into objects with a definite mark, indicating its value and the person responsible for its issue.
The first official currency was minted in Turkey in the 600 BC. A standardized coinage allowed trade to flourish across the Mediterranean. In 1250 AD, a gold coin minted in Florence called ‘The Florin’, was widely accepted across Europe, encouraging international commerce.
4. Paper Money
In 1290 AD, Marco Polo’s travels to China introduced the idea of paper money to Europeans. However, the first banknotes were printed in Sweden. In the 19th century, commercial banks started issuing their own notes in different colours and denominations. It was the confusion of varied notes floating in the market that led the Central bank to take over the issuance of bank notes. Today, all countries issue currencies in accordance with the monetary requirements of the economy.
5. Credit Money
The increased volume of transactions and the limited time for counting led money to became dematerialized and assume abstract forms. This introduced the concept of Bank Money (credit money) in the form of cheques, drafts, bills of exchange, credit cards, etc. It was in 1946 that John Biggins invented the ‘Charg-it’ card, the first credit card.
6. Electronic Money
Around 1999, European banks began offering mobile banking (electronic transactions) with primitive smartphones. Internet banking and E-wallets became popular in other parts of the world as well.
While several digital currency systems were proposed since the 1980s, Bitcoin (proposed in 2008) entered the mainstream and became the first successful decentralized peer-to-peer crypto-currency. These currencies have no intrinsic value and exist entirely online in the form of bits and bytes.
Although crypto-currencies are currently accepted only in a few marketplaces, the rise of BitCoins, LiteCoins and DogeCoins could change the future of finance forever.
From banks to phones, long queues to just a click, money and its evolution will continue to baffle us with new and improved methods making its way with the passing years. However, the onus of its wise management lies in the hands of our children. Introducing them to financial lessons early in life will develop a strong sense of savings in them besides making smart investments. It’s necessary to develop the cognitive skills at a young age to enable them to be money-smart and secure their wealth.
Do you involve your kids in finances? How? Check out these activities to help kids learn about money. Share your thoughts in comments.