Teacher Guide to Teaching About Money
The history of money (What did people first use as trade, how did we advance to using paper and coins?)
Did you ever wonder what people did when money was not yet in circulation? The history of money dates back to thousands of years. It originated primarily on the concept of gift-giving between two parties. There was no expectation of reciprocation, and the concept of barter or trading of goods only existed between complete strangers, and not within close social groups.
What did people first use as trade? Well, the first trading or bartering of goods that were seen to be of equal value to both parties in the exchange were usually between traveling nomads or strangers that traveled from afar. Only goods were exchanged for other goods of similar value that they could take back with them.
The concept of monetary exchange was developed by the Sumerians in Mesopotamia, known today as Iraq. Being the earliest place where civilized societies were established, they developed the use of money which was in the form of precious shells, beads, metals, and other small items of value. This concept of commodity money was used because there are some items like food that are perishable or are not available within a certain season throughout the year. Farmers would use this "money" to purchase goods from each other, and in turn would also end up selling goods to the same farmers for the same amount of "money" when his harvest was the next needed item during the season.
How did we advance to using paper and coins? Precious metals being more valued because they lasted longer (i.e. gold and silver), eventually were developed further. An example of this is when the Egyptians started to use exact weights and measures to create gold bars that had the same weight in gold to exchange for goods. Sumerians did the same with silver. Coins were then developed and the earliest known coin with set turtle markings that has been discovered was found on a remote island of Greece (Aegina Island).
Paper money was first used by the Chinese, mainly because they were the originators of papermaking. It became tradition for merchants to leave their coin-based money with friends and hold onto a piece of paper that stated how much money he had stored there. This was prevalent in the 600s and continued on until 960 when, due to shortage of copper coin production, China began circulating its own version of paper money as the main medium for monetary exchange. Hence the use of paper money was born, the beginning of large developments in the history of money.