However, coins were also heavy and difficult to carry around. Scholars think that the Chinese were the first group of people to come up with the idea of using paper money. The paper money was bought by paying for it with coins. So a paper note, that cost twenty coins to buy, could be used for buying things up to a value of twenty coins. This is how money began. We still use the same system today. Our coins are made of metal, and paper money is worth a certain amount of coins, and can be swapped for coins at the bank.
People started to use one thing to swap for everything else. This was the beginning of money. At first, it didn’t look much like money. Different people used different items. Some people used beads, iron tools or barley, or even small animals. Animals and barley were not very practical, because you couldn’t keep them in your pocket when you went to the market. Cowry shells were used in China, Africa and India, and the Native Americans used clam shells, called wampum. These were very highly decorated and everyone wanted them. That was important, because if no one wanted them, you could not swap them for anything.
At the same time as the Americans were using shells, people in other countries were using pieces of metal. Pieces of silver were first used in Mesopotamia, which was the old name for parts of Iraq, Syria, Turkey and Iran. The biggest problem with a piece of metal was that it was hard to break into smaller pieces to use. The Lydian people, who came from an area of what is now Turkey, came up with the idea to make coins in about 600 BC. They pressed the metal into flat, round pieces, and different size coins had different swapping value. Later, they made coins of different metals, and each type of coin had a different value.
At first, people used to do direct swaps for what they needed. This was called bartering. For example, maybe you had a lot of corn, but no meat, and your neighbour had a lot of meat, but no corn. You agreed on a fair swap, and exchanged corn for meat. Of course, this system meant that people used to spend all their days looking for someone to swap with. That was when people came up with a better idea.
Different items for money
Metal money
Corn for meat
Bartering
Decorated money
Twenty coins
The Lydian people
Paper money