What is Money? - concept #1

So what is money anyway? We learn about it when we're kids, but many of us really never know much about it. Perhaps that's why we have a hard time managing it.

Money is a focal point in our civilized lives, and concept #1 of the money game, so let's understand it better.

Money is a medium of exchange traded between people in lieu of goods, services, food, lodging, clothing, materials or other items. Money is something that we accept like a general IOU.

We accept money in lieu of these other things. For example, if you cut someone's grass, they trade you $20 for your services instead of providing you with a bushel of apples, or a bicycle.

The money you earn can then be exchanged for other things that you desire, at a time and place of your choosing. You can cut the grass one day, and exchange your money from cutting the grass for a bushel of apples when you go to the farmers market that weekend.

When I think about money, I relate it to my time, my labor and my talents. The money I have was earned through exchange of those things. What is money to me? It represents the fruits of my labor. That's important to remember.

We use money to buy most things in life. However, money can't buy happiness, love, respect or fulfillment. None of those "warm and fuzzy feelings" can be purchased anywhere at any price.

The big difference between money and a traditional IOU is that this type of IOU is freely accepted among people as having value. The reality is that it's fiat currency - it has value because we believe it does, not because it really does.

What is money in it's most basic form? It's paper currency with a value printed on it, and metal coins with a value stamped on them. Unless you exchange them for something else, you just have paper and metal issued with the assurance of government that it has value.

There are forms of currency other than money. If you have something that someone else wants, you can use it as currency to barter. You can exchange it for something else that you would otherwise have to use money for.

Done with What is Money, back to The Money Game