Unit 3
Understanding Money
Unit 3
Learning Outcomes
At the end of this unit, students should be
able to:
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Understand the history of money
Describe the form that money takes in
today’s society
Understand saving
Understand compound interest and how it
works
Unit 3
Barter
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Barter preceded the use of money
System for exchanging goods
Number of issues
 Inefficient
 Items many not have similar value
 Coincidence of wants – if nobody
wants what you have to barter =
no deal
History of Money
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1000 BC – China began to
manufacture copper cowrie shells
600 BC - First minted coins –
Lydia (not western Turkey). Made
from electrum (mixture of silver
and gold)
118 BC – Leather money used in
China – believed to be early form
of banknote
History of Money
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30 BC – Cesar Augustus reformed the Roman monetary
system. Issued gold, silver, brass and copper coins
800 AD – China started using paper money
Easier to carry and could not use metals for making
essential objects
Called 'fei qian‘ - 'flying money'
1200 AD – The Florin, minted in Florence, Italy became
a widely accepted currency in Europe
History of Money
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17th Century – Paper
money was first used
when Sweden began
printing own paper
monetary certificates
Move to paper helped to
increase and facilitate
international trade
Ireland – Notes and Coins
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Ireland introduced first notes and
coins in 1928
Original notes featured Lady Lavery
Coins featured Irish animals and fish
‘Pegged’ to sterling until 1979 when
one-to-one exchange rate was finally
broken
History of Money
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January 1999 – Eurozone came into
existence
11 Member states signed up
UK opted to retain sterling currency
Exchange rate IR£1 = €1.27
Euro Notes and Coins officially
introduced on 1st January 2002
How do we use Money?
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Irish people – heavy users of cash and
cheques
Average 36 withdrawals from ATMs each
year – 50% higher than EU average
Cheque usage declining but still very high
2013- National Payments Plan aims to
increase usage of electronic payments
Estimated that Irish economy could save
€1bn if switch from paper to electronic
New Developments
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Bitcoin introduced in 2009
Virtual Currency
No central authority –
controversial
Peer-to-peer payments
Future?
The Euro
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Legal tender in 18
countries (2014)
Notes – 7 denominations
Coins – 8 denominations.
Coins have common side
and national side
What is Money?
“Money is anything that is generally
accepted as payment for goods and
services and repayment of debts…”
What forms are available? Can you think
of a few examples…
What are Savings?
“Savings are the process of setting aside
money until a future date instead of
spending it today. The goal of saving is
provide funds for emergencies, short term
goals and investments”
OR
“A fund of money put as a reserve for the
future”
Uses of Money
Students understand 4 main uses on money from
communion to birthday presents:
1.
2.
3.
4.
Saving (10%)
Giving (10%)
Investing (10%)
Spending (70%)
Example: allowance €/£ 10 per week but put
€/£1 in savings for Christmas, holidays,
birthdays, college, debs etc.
How do savings work?
1.
2.
3.
4.
5.
A customer deposits savings in a bank / credit union.
Added to the pool of savings held
The bank / credit union uses these funds to fund loans
to other customers.
The bank / credit union gets income from the interest
that customers pay on their loan.
This income is used to run the bank / credit union and it
is also given back to customers in the form of interest
on their savings.
How do savings work?
A depositor / investor will look at the
options on how interest is calculated
and credited?
He / she will assess the A.E.R.
( Annualised Equivalent Rate of Return)
Compound Interest
This is the interest added to the principal so
you get interest on interest.
The COMPOUND ANNUAL RATE ( c.a.r.) is
the rate you get when calculating your
interest.
Example: how much will you receive if you invest
€/£500 @ 4% per annum for two years?