Money

Money is the basic medium of exchange. For any activities and services, basic charges are deducted from daily lives. For example, to buy commodities like dresses and food, to visit a zoo or museum, and to consult a doctor, we have to pay money. Money is measured and valued in different units, such as dollars, euros, and rupees. The smaller denominations are measured in units such as cents or paise—for example, 1 dollar and 10 cents.

Money in mathematics includes calculating change, interest, budgeting, understanding taxes, and discounts. Mathematics related to money is essential in fields such as finance, banking, and commerce.

The concept of money has existed since ancient civilizations. Way before money was introduced, people used the barter system for transactions. These transactions involved exchanging goods and inventory for other goods and services. As the barter system became less effective, people started to exchange shells, salt, and precious metals. The minting of the first metal coins dates back to around 600 BC in Lydia, present-day Turkey. Later, during the Tang dynasty in China, paper money was introduced. In the 17th century, banks in Europe started issuing notes, which led to the development of modern banking systems.

In recent times, after the development of the internet, online banking, including digital transactions, was introduced. Now we use various forms of money, such as digital transactions, credit cards, cryptocurrency, notes, and coins.

Money has various properties, and learning about them can help us understand how money works. Some properties of money are mentioned below:
 

• Durability: Money, in the form of paper, must be able to withstand wear and tear overtime. In many countries, paper money is still considered good enough, even if there is minor wear and tear.
  
   
• Portability: One of the properties of money is that it can be easily carried around and transferred from one person to another. 
  
   
• Uniformity: Uniformity brings standardized transactions into the picture. Minting money of different denominations allows easy flow of transactions.
  
   
• Limited Supply: If the money has to maintain its value, the money that is being minted must not be produced in excess. If produced in excess, it decreases the value of the currency, thus leading to inflation. 
  
   
• Acceptability: If money has to be called money, it has to be accepted everywhere as a medium to exchange goods and services. 
   

If students learn these properties, they will understand the concept of money and how to use them.

Money can be classified into various categories. Learning them will help students understand the differences and use them efficiently. Types of money are mentioned below:

 

• Currency: Currency refers to the physical form of money in circulation within an economy. It includes banknotes and coins issued by the government or central bank and used as a medium of exchange for everyday transactions. Currency is a part of fiat money, but the term specifically refers to the tangible money people use daily. For example, US Dollars (USD), Euros (EUR) and Indian Rupees (INR) are all currencies.
  
   
• Commodity Money: Commodity money is the money that has an intrinsic value to it. Commodity money includes commodities like gold, silver, or other valuable materials. 
  
   
• Fiat Money: Fiat money means the money that is government issued. This type of money does not have any intrinsic value but is accepted as a legal tender. For example, paper money and coins. 
  
   
• Digital money: After the introduction of the internet, money no longer needed to be only physical in nature. Direct transfer of money from one bank account to another made electronic transactions possible. This paved the way for online transactions and digital wallets. 
  
   
• Representative Money: This type of money is backed by a commodity, like gold or silver, but it is not made by using the commodity. For example, gold-backed certificates. 
  
   
• Cryptocurrency: Money that is decentralized and digital is called cryptocurrency. Cryptocurrency is secured by cryptography. Some types of cryptocurrency are Bitcoin and Ethereum.
  
   
• Fiduciary Money: This refers to a type of money which is accepted based on trust. The transaction is done between two trusted parties, the payer and the payee. The money is accepted as a medium of exchange and is not recognized as legal tender by the law. 
  
   
• Commercial Bank Money: This type of money is the money that is created by banks through lending and borrowing and deposits. It exists in the form of digital balances.

Counting money is an essential and everyday skill. Let us see how we can count coins and notes together. 

Step 1: Identify the value written on each coin and note. The color, style, and size of each denomination will always be different. 

Step 2: Group similar coins and notes together. For example, group all the $1 notes in a pile, $5 notes in another pile, and so on. This makes counting easier and faster.

Step 3: Now count each group separately. Count the total value of each group instead of counting everything at once. For example, if you have five $10 notes, count them as \(5 × 10 = $50\). 

Step 4: Once each group has been counted, add the totals to get the final amount. For example, if you have $50 in notes, $15 in coins, and a single $10 note. Then, the total is \($50 + $15 + $10 = $75\). 

Step 5: Always confirm the counted money by double-checking. You can count again in the same method or count backwards, from the highest notes to the lowest coins.

The concept of money is important and essential for students, as it plays an important role in their daily lives and future financial well-being.

Basically having a knowledge about money will help students to analyze the costs of products they are buying like books, toys, chocolates, and so on. If the students learn how to manage money, it will help them develop their budgeting skills and differentiate between their wants and needs. It also helps them cultivate a responsible attitude in spending. Learning this concept will help students understand the importance of saving for emergencies and investing for the future, which will avoid unnecessary debt.

Financial literacy helps students make well-thought-out decisions about personal expenses and career choices. If the students understand this concept early on, it will help them gain independence, discipline, and financial security and prepare them for long-term success.

Functions of Money

Money plays an essential role in every economy. It makes buying, selling, saving, and planning much easier. To understand why money is so important, we examine its key functions. These functions explain how and why money is used in daily life.
 

• Money is the most essential medium of exchange. It is used to buy and sell goods and services. It makes trade more efficient and straightforward, helping people buy anything they need without exchanging goods. 
  
   
• Money provides a common way to measure value. Money helps us compare the value of different goods and services. It gives a standard way to express prices. Makes price comparison easy. It helps people keep financial records. It allows businesses to calculate profits and losses.
  
   
• Money can be saved for future use. Money allows people to save their earnings for later use. It keeps its value over time. It is more convenient and safer than storing goods.
  
   
• Money is used to make future payments. When loans, EMIs, or credit purchases are made, people agree to pay money later. Money makes borrowing and lending reliable and straightforward.
  
   
• Money can be easily sent from one place to another. Digital money can be easily transacted without causing physical damage to the money. It can overcome the barriers of distance and direct human involvement.

If students want to master the concept of money, they can follow the following tips and tricks to understand the concept better:

Budgeting and Money Management: Students can start tracking their income and expenses to understand where the money is going. Money can be managed by following the 50/30/20 rule. The rule is to reserve 50% of our total income for our needs, 30% for our wants, and 20% for savings and investments. Students must learn to plan their expenses like vacations, gifts, and medical emergencies. 

Smart Saving: Students can follow the 'pay yourself first' rule, which means save before spending. They must learn to save at least 10% - 20% of their income, no matter how small. 


Avoid Unnecessary Debt: Students must be cautious about keeping debts. Students must always understand that there is going to be an interest rate whenever they borrow money from instant loan apps, and it will bring them more debt if they do not pay their EMIs on time.



Smart Spending: Students must be wise when it comes to spending their money. They must use student discounts on food, transportation, and subscriptions. Instead of spending outside on food, students can practice eating home cooked meals as it saves money. 



Financial Literacy: As long as the students have financial literacy, they will be able to understand the concept of money easily. Students can read books related to financial literacy like 'Rich Dad Poor Dad' and 'The Psychology of Money' to understand more about money and savings. They can also follow podcasts, YouTube channels, and finance blogs.



Make money learning hands-on: Parents and teachers can use real or play money for counting, sorting, and role-play shopping to help children understand value through authentic experiences.



Teach the value of choice: Explain that money involves decisions and trade-offs, helping children think before they spend and choose wisely. Teach them to compare prices and understand market values to make wise decisions. 



Encourage goal-based saving: Guide children to set small saving goals. Please encourage them to use jars or piggy banks to track progress, building discipline and patience.



Give money management lessons: Show students good financial behavior, such as budgeting and comparing prices, because children learn directly from adult examples. And allow children to manage small allowances or classroom funds, which helps them practice budgeting and accountability. 



Promote gratitude and sharing: Encourage children to appreciate what they have and donate a portion of their money or items to develop generosity and awareness.

There are many real-world applications of money as it is widely used. Let us now see the different applications of money and where money is used: 
 

Buying and Selling Goods and Services: We use money for everyday transactions like to purchase food, clothing, transportation, entertainment and other goods and services we want or need. Businesses also use money to buy raw materials, pay their employees, and sell their products and services. 
 

Measuring Value: We use money as a common unit of account to express the value of goods and services, which makes it easier to compare prices and make purchasing decisions. Money is also used to measure economic activity like GDP, inflation, and unemployment. 
 

Saving and Investing: We use money for future goals like education, retirement, or down payment for a house, vehicle, etc. We also use money to grow our wealth like investing in stocks, bonds, real estate, and other assets that will increase our wealth in the long run. 
 

Paying Debts: We use money to pay our debts like loans (student loans, vehicle loans, mortgages) or credit card bills. Businesses also use money to pay their suppliers, creditors, and other obligations that they have. 
 

Charitable Giving: We use money to support causes like NGOs that support the causes that we believe in. Wealthy individuals and businesses use money to fund initiatives that benefit the society.