Lessons · Teaching · money, saving and what a bank is for
Money is a tool for three jobs
Money works as a medium of exchange, so goods can be traded without barter matching up; as a unit of account, so values can be compared; and as a store of value, so it can be kept for later. A bank holds deposits, lends them out, and pays interest for the use of them.
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In beta. This lesson was written for Hone and has not yet been checked by a state certification officer. Practice material, not professional advice. What that means.
What it is for
Barter fails because two people must want exactly what the other has at the same moment, and once a pupil sees that, money stops being an arbitrary invention. Interest then follows: a bank is paying you for the use of your money, not for keeping it safe.
How to think about it
Start from barter failing and let money be the solution to a named problem. Then separate saving from spending by time: saving is spending later, which is the same opportunity cost from two lessons back.
Worked example
Barter needs both people to want what the other has, at the same timeWhich is the problem money solves, and why it was invented repeatedly.
Money is a medium of exchange, a unit of account and a store of valueThree jobs, and an examination asks for them by name.
Saving is spending later, and its opportunity cost is what you did not buy nowWhich joins this to scarcity rather than leaving it as a virtue.
A bank lends out deposits and pays interest for the use of themInterest is rent on money, paid in both directions.
Your turn
Name the problem with barter that money solves.
Barter needs both people to what the other has
Solve one, graded on the server
The trap
Teaching saving as simply good. It has a cost, which is whatever the money could have done now, and naming the cost is what makes the choice a real one rather than a moral one.