Lesson 10: The History and Future of Money

Lesson 10: The History and Future of Money

Learning Objective:

Students will be able to understand the evolution of money and identify what makes “good’ money.

Pre-work:

Stash101 Simulation (3 min)

Slide: Stash101 simulation
Say: One thing on the research list in the last lesson was 401ks. Basically, a 401k is an employer-sponsored retirement account. Employees can invest pre-tax income, and employers sometimes match part of an employee’s contributions.

Chances are good that you’ll have the opportunity to invest part of your income in a 401k soon, if not now. So let’s see how that works. Log into Stash101, and go to My Bank > 401k Settings. Then select the percentage of your simulated income that you’d like to contribute. Afterward, click Overview and scroll down to the 401k tab. Here’s where you can monitor your 401k contributions. And that’s something you should do when you have a real 401k, too—it’s a good idea to keep a close eye on your money. 

Say: When you’re done, spin the 101 Wheel!

Hook (2 min)

Slide: Which of these do you value most?
Say: When you think of money, you may think of dollars. But (of course) there are other things that hold value. Which of these things do you personally value most, or would you like to have more of—and why? Dollars, gold, bitcoin, something else?

Call on 2-3 students.

Say: Let’s talk more about dollars, gold, bitcoin, and money. And maybe pineapples and seashells!

Definition of Money (5 min)

Slide: Definition of Money
Say: It’s important to understand the definition of money. Money is a medium of exchange, unit of account, and store of value

What does that mean? 

  • A medium of exchange is an item that represents a value and is used in exchange for goods and services. 
    • Example:
      • A dollar or coin
  • A unit of account is something that allows for the measurement and comparison of value of different things; it is countable and easy to do simple math with, such as adding, subtracting, multiplying, or dividing.
    • Example:
      • A dollar. Two different items that each cost a dollar are valued at the same amount (one dollar is worth the same as another dollar); and a dollar can be divided into 4 quarters or 100 pennies and still be worth the same
  • A store of value is an asset that maintains its value over time without depreciating (or losing value)
    • Example:
      • Gold

Slide: Money vs. currency
Say:  Fiat currency—or paper and coin currency—is a government-issued medium of exchange that’s a generally accepted form of payment for goods and services, but it has no store of value (vs. gold, for example). So is the U.S. dollar money or currency? 

Slide: Graph of the value of the dollar
If you look at this graph, you’ll see that the dollar has lost its purchasing power, or store of value, over the past 100 years. Because of this, many people believe that the U.S. dollar should be considered fiat currency, or just a lower quality of money. 

A Brief History of Money (5 min)

Slide: A brief history of money
Say: We’re going to watch a short overview video about the history of money to get a better understanding.

Watch video: The Evolution of Money

“Good” Money Activity, Part A (10 min)

Slide: The 5 Characteristics of Good Money
Say: Think about how money has evolved. Why has it changed? One reason is that people have been trying to develop what’s considered “good” money.

Say: There are five characteristics that make “good” money: it has to be fungible, divisible, portable, recognizable, and scarce. 

  1. Fungible—The $1 coin or dollar in my pocket is worth the same amount as the $1 coin or dollar  in your pocket.
  2. Divisible—You can easily divide it up into intentionally smaller pieces. For example, 1 dollar can be divided into 4 quarters or 100 pennies.
  3. Portable—You can easily transport the item without a lot of effort—it’s movable and durable in the long-term. So a cow would be a non-example, because they are heavy and really slow.
  4. Recognizable—People know what it is around the world and can easily identify it as money.
  5. Scarce—There is only a limited supply in the world, so it would be hard to replicate or produce more of it. An example would be gold, because there is a limited supply of it in the world.

Slide: What makes good money?
Distribute this worksheet and have students form small groups.

Say: Based on what you know right now, which of these items do you think count as “good” money? Work together to decide and feel free to leave the Bitcoin column blank if you aren’t familiar with it because we will learn more about that in a bit. 

The Gold Standard (5 min) 

Slide: What’s the gold standard—and should we bring it back?
Say: How many of you have ever heard of the gold standard? Raise your hands. Let’s find out out more about it by listening to this: Why We Left the Gold Standard

While listening, jot down 1-2 reasons for—and 1-2 reasons against—bringing back the gold standard. 

Bitcoin and the (Current!) Future of Money (10-15 min)

Slide: Bitcoin and the (current!) future of money
Say: Raise your hand if you have heard the term “Bitcoin.” Now give me a fist-to-five sign indicating how much you know about Bitcoin (fist represents zero/no knowledge and five fingers represent being an expert). 

Ok, let’s take a closer look.

Slide: What is Bitcoin?
Say: Bitcoin at its most basic level is money you can send through the internet. It’s a type of cryptocurrency.

Slide: A little deeper
Say: Bitcoin is:

  • decentralized, meaning no entity like a government controls it
  • digital, meaning it’s online
  • peer to peer, meaning from person to person, without the need for an intermediary like a bank to hold or store it
  • a payment system, meaning it goes beyond just the money aspect—it’s an actual system, and you can send and receive money on the system

Slide: And a little bit deeper
Say: Bitcoin runs on a technology called a blockchain. A blockchain is a public ledger or running record of all transactions ever done with Bitcoin. So if Sam sends 1 bitcoin to Tameka, it would be recorded on a public record across all the computers that run the Bitcoin blockchain. 

Slide: Things to know about Bitcoin
Say: Here are a few more characteristics that are important to know about Bitcoin.

  • No government can control and “print” more of it. Importantly, printing more money often leads to inflation and the devaluation of the currency. 
  • There will only ever be 21 million bitcoin in circulation, so it is scarce. 
  • To access Bitcoin, you don’t need a bank account, which is amazing for the 2.5 billion people in the world who are unbanked. All you need is the internet.
  • And finally, it can’t be counterfeited—and transactions can’t be reversed—because once a bitcoin is sent, it displays on all of the computers that are hooked up to the Bitcoin network, also known as the Bitcoin blockchain. So all of the Bitcoin transactions that ever happen are visible on the public ledger on the Bitcoin blockchain. 

Slide: Why was Bitcoin invented?
Say: You may wonder why Bitcoin was invented. In a word? Trust. Read this quote from the founder of Bitcoin.

Slide: What are some other cryptocurrencies or altcoins?Say: Bitcoin is just one of many cryptocurrencies. There are more than 12,000 different cryptos!

Slide: Is Bitcoin money?
Say: Let’s step back for a minute and figure out if Bitcoin is money.

Slide: What is money, again?
Say: Money is a medium of exchange. Do people use Bitcoin to buy things? Yes, they do, and it is becoming easier to pay with it, especially as it sees more adoption globally.

Is Bitcoin a unit of account? Can you break it up into pieces? Yes, you can—one bitcoin can be divided into up to 8 decimal places. If this seems confusing, think about how the U.S. dollar can be broken into tenths and hundredths, like dimes and pennies. 

Is it a store of value? Does it hold value in people’s eyes, and is it scarce? Yes—and there will only ever be 21 million bitcoin in the world. So yes, Bitcoin does fit the definition of money!

Slide: Bitcoin = money. But is it “good” money?

Ask: But is it considered “good” money?

Reflection: “Good” Money Activity, Part B (5 min) 

Slide: Which of these are “good” money?
Say: Please get back into your small groups and pull out your worksheet from earlier.

Say: Based on what you’ve learned in this class, go back through the worksheet and see if you’ve changed your mind. Also, if you don’t think the item qualifies as “good” money, explain why.

Give students time to work.

Ask: Which of these things do you consider good money? Why?

Call on students and then share the answer key.

Exit Ticket (3 min)

Slide: Exit ticket
Say: If you were deciding on a form of currency or money for a brand new country, what would it be—and why? You may choose one of the forms we’ve discussed or come up with your own. Give me your written response on your way out.

Homework (2 min)

Slide: Homework
Watch this video: 

Slide: Pre-work for next session
Say: Watch this video, starting at 7:14: 

Round Table Discussion: Behavioral Finance

-OR-

Listen to a Next Gen Personal Finance podcast on the psychology of money

-AND-

Read this article: Guide to Investing Psychology

Display Takeaway slide.