Event! Virtual Team Challenge
Week Three: Money
Student Handout
Money is a generally accepted medium for the exchange of goods and services, for measuring value, or for making payments.
Some Key Terms from class:
1. Commodity money: An item that is considered money because it holds value
2. Representative Money: Tokens or pieces of paper that are not intrinsically valuable themselves, but can be exchanged for a specific commodity, such as gold or silver.
3. Fiat money: Similar to representative money except it can't be redeemed for a commodity, such as gold or silver. The Federal Reserve notes we use today are an example of fiat money.
4. Medium of Exchange: One of the three uses of money. People accept money in trade for goods and services.
5. Standard of Value: One of the three uses of money. The value of a good or service can be measured with money. For example, a car with a price of $2,000 is worth twice as much as a car with a price of $1,000.
6. Store of Value: One of the three uses of money. Money can be saved and used in the future.
What is Money?
Consider this: Again, we visit our prehistoric community. You want to trade your fish to the sandal maker for the sandals you need but what if the sandal maker next door doesn’t like fish? You still need sandals and he won’t trade for fish! What do you do?
The answer to this problem is “money”. As humans started to organize, they needed a way to ensure everyone had a way to trade for the things they needed to survive. They came up with items that everyone agreed to accept in trade, such as seashells, beads, fishhooks and even precious metals. It was agreed how many seashells your fish, and the sandal maker’s sandals, were worth. These items, or commodities, became the earliest forms of money.
Every wonder where Money came from?
The Chinese were the first to use paper money, beginning in the Tang Dynasty (618-907 A.D.). During the Ming Dynasty in 1300 AD, the Chinese placed the emperor's seal and signatures of the treasurers on a crude paper made from mulberry bark.
In 1715 Maryland, North Carolina and Virginia issued a "tobacco note" which could be converted to a certain amount of tobacco. This type of representative money made it easier for colonists to make large payments – instead of having to carry around heavy bags of coins, or tobacco leaves.
In the late 1800s, the U.S. government started to issue gold and silver certificates. The notes guaranteed the holder the right to redeem the note for gold or silver from the U.S. Treasury.
Then, almost 40 years ago, in 1967, Congress authorized the U.S. Treasury to stop redeeming silver certificates in silver dollars or bullion. By 1970, silver was removed from the production of coins, and old coins containing the silver were gradually removed from circulation and replaced with new coins. These were “clad” with layers of a copper-nickel alloy that is still used today in coins.
Government Agencies that Regulate Money.
The United States Treasury is responsible for printing money and borrowing on behalf of the government. The Federal Reserve is responsible for maintaining the integrity of U.S. currency. The Federal Reserve releases and recalls money printed by the Treasury into and out of circulation – and also receives your taxes. The Federal Reserve is most well known for setting monetary policy —controlling the amount of money in circulation—to keep prices stable.
If prices remain stable, people have confidence that the dollar they use to buy goods and services today will buy a similar amount in the future.
Do you have a job? Do you make money? Do you feel you know how to manage it, or do you have trouble?
Tip for Success: Since money is used to value and pay for the things we need to live, managing it wisely is a good idea. Adequately planning how much you spend and save can allow you to accumulate money over the years. When thinking about entering your working life after you graduate high school, you should also think about how your decisions about money may impact your future. It is critical to know how money decisions fit together, and how you can adequately plan for, and reach your goals.
The three things to understand about money are saving, investing, and borrowing. You can develop responsible habits that will enable you to prepare for financing your education, avoiding debt problems, and maybe even planning retirement.
Lessons for Success: There is a simple process that you can go through to set goals for yourself to learn how to manage your money.
1) Money is primarily earned by working, not given freely. Remember that money is usually earned. Get a job as soon as possible and realize how hard you have to work for each dollar you earn – and be careful to treat each dollar you spend knowing what it took you to earn it.
2) Learn to save money in order to accomplish certain goals. Remember that money is used for many things. Write down what you’d like to use money for, how much you think you’ll need, and then plan on how to get there.
3) Use a bank to save money. Learn about, and use, your local banking institution.
4) You can earn interest by saving and investing. Learn about saving and investing, which are the keys to building wealth.
5) Avoid debt -- money that is borrowed is repaid with interest. Try not to borrow to pay expenses, and repay your debt as soon as you are able.
Money is a valuable resource in New City. Your ability to manage your money will determine your individual success and your team’s success.