Chapter 1. What Is Money and Where Does It Come From? FREE
1. What Is Money and Where Does It Come From?
Think about the last time someone in your family bought bread, airtime or a packet of chips at the spaza shop. They gave the shopkeeper something, and the shopkeeper gave them the goods. That "something" was almost always money. In this chapter we find out what money really is, why people invented it, and where it comes from.
What is money?
Money is anything that people agree to use to buy and sell things. In South Africa our money is called the Rand (written as R). We have coins like 50c, R1, R2 and R5, and banknotes like R10, R20, R50, R100 and R200.
Money is useful because it does three important jobs:
- It lets us buy and sell. You can swap money for almost anything — a loaf of bread, a taxi ride, or a school uniform.
- It measures value. A price tag tells you how much something is worth. A cooldrink might cost R12,50 and a school bag R150.
- It can be saved. Money keeps its value, so you can put it away today and spend it next month.
Life before money: bartering
Long ago, before money existed, people used barter. To barter means to swap one thing directly for another. A farmer with extra mielies might swap them for a neighbour's eggs.
But barter had problems. Imagine you have a chicken and you want a pair of shoes. You must find someone who has shoes and who also wants a chicken — at the same time! That is very hard. This is why people invented money: it makes swapping much easier because everyone accepts it.
Why money works better than barter
Let us compare. Suppose Thandi makes beautiful beaded bracelets and Sipho grows tomatoes.
- With barter: Thandi can only get tomatoes if Sipho happens to want a bracelet. If he does not, she gets nothing.
- With money: Thandi sells a bracelet for R25 to anyone who wants one. Then she uses that R25 to buy tomatoes from Sipho. Easy!
Money is also easy to carry, easy to count, and can be divided into small amounts.
Where does money come from?
In South Africa, the official money is made by the South African Reserve Bank. The notes are printed by a company called the South African Bank Note Company, and the coins are made by the South African Mint. Only these official places are allowed to make our money — if anyone else makes money it is illegal and is called counterfeit (fake) money.
But there is another important question: where does your money come from? People earn money by working. When a nurse, a taxi driver, a teacher or a shop owner does a job, they are paid money in return. This payment is called an income. So money comes to families mainly when someone works and earns it.
A worked example
Lerato helps her aunt at a fruit stall on Saturdays. Her aunt pays her R30 for the morning. Lerato wants to buy a comic that costs R18 and a juice that costs R9.
How much will she spend in total?
[ 18 + 9 = 27 ]So Lerato spends R27. How much money will she have left?
[ 30 - 27 = 3 ]Lerato will have R3 left over. She earned R30 by working, then used it to buy things she wanted, and still had a little to save. This shows the whole money story in one morning: earn it, spend it, save some.
Summary
- Money is anything people agree to use to buy and sell. Our money is the Rand (R).
- Long ago people used barter (swapping), but it was slow and difficult.
- Money makes buying and selling easy because everyone accepts it.
- Official South African money is made by the Reserve Bank and the SA Mint; fake money is called counterfeit.
- Families get money when someone works and earns an income.