We all use money almost every day. Maybe you pay with cash or receive a paycheck; maybe you buy something with your credit card or transfer funds electronically to your retirement fund. It’s amazing how far our money has come. You can easily transfer money from an account simply by tapping your phone, use an app to send a payment to someone, or receive your checks virtually.
Money takes many different forms today, but have you ever wondered where it all started? Where did money originate and how did it transform into how we use it today? It’s time to become informed about the history of money! We will cover the origins of the concept of money as well as how money evolved over time into what we recognize today.
To start with we need to go WAY back in time. Archaeologists generally agree that the concept of “money” began with bartering and trading. In a hunter-gatherer society, some individuals would grow or gather while others hunt.
They could then trade goods with each other allowing everyone to have everything they needed. While it might be easy to exchange cattle for grain in a local area, as travel began to expand, so did the need for a new way to trade for items of value.
In 3000 BC the shekel appeared. This coin was used to represent a certain value and could be used in exchange for goods. Between 1000 BC – 400 AD even more standardization came about for different coins. We see coins in many historical manuscripts such as The Bible, for example, which talks about money belonging to Caesar.
Having a standardized currency allowed individuals to easily trade without having to carry goods with them everywhere! Just imagine if you had to carry around a sack full of goods every time you wanted to go shopping- modernized money has created a convenient way for us to trade goods. When you are paying money for an item or service, you’re essentially trading value for value.
In the 11th century, China began to use paper bills. As it was recognized that they could represent an even higher value, this trend continued through Asia and diffused into Europe.
In the 1400’s goldsmiths began to operate as bankers! These tradesmen could hold gold for individuals in exchange for a note indicating how much gold they maintained.
This practice grew into a much larger business where we can see such entities as the Bank of England which offered the first demand deposits. As a state-run operation, it printed currency and offered standardization.
Moving into the 1700’s through the 1900’s, money began to be printed more regularly and its value was based on the worth of gold. Then in the 1900’s, the US moved away from using the gold standard and created its own standard backed by the government.
With this change came many things such as inflation which we will be talking about in another post. We will also be learning about crypto-currencies and other modern methods of exchanging money that are creating a whole new way of trading!
Fun Fact: Did you know that our word “budget” comes from the ancient word for “purse”?
The idea of having coins in your purse is still a relevant way that we use for budgeting today. At Becoming Financial we help clients divvy up their available funds between different buckets or “purses” to stay on track with their budget and spending! Not only does this help control spending, but it allows us to visualize where your money is going and helps you set goals.