Wealthonauts Explorer Course (Ages 8+)
The three jobs of money (ages 8+)
Learning objectives
- Explain why barter can be hard
- Name the three jobs of money
- Describe how cash and bank money are different
Explanation
Before money, people bartered. That means they traded goods directly, like eggs for shoes. Barter has a big problem: both people must want what the other one has at the same time. Economists call this the "double coincidence of wants."
Money solves that problem because it does three jobs:
- Medium of exchange: people accept it in trades.
- Unit of account: it measures prices, so you can compare a $3 sandwich with a $6 pizza.
- Store of value: you can save it and spend it later.
Over history, people used shells, salt, metal coins and paper money. Today, most money is not cash at all. Instead, it is numbers in bank accounts that people move with debit cards, checks and apps.
Everyday example
Maya earns $10 for helping a neighbor. She uses money as a medium of exchange when she buys a $4 book, as a unit of account when she compares prices, and as a store of value when she saves the other $6 for next month.
Words to know
- Barter
- trading goods directly without money
- Medium of exchange
- something people accept in trades
- Unit of account
- a common measure for prices
- Store of value
- something that keeps value over time
- Currency
- coins and paper money
Interactive activity: Which job is money doing?
Quiz
Get at least 3 of 4 right to pass and complete this mission.
Summary
- Barter needs both people to want what the other has
- Money is a medium of exchange, a unit of account and a store of value
- Most money today is held in bank accounts