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Where Does Money Come From? Curious Currency Facts For Kids

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Many economists try to understand where does money come from.

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An essential characteristic of modern economic activity is none other than money.

Every loan that a bank sanctions creates new money which drives the monetary system of an economy.  Money supply forms the backbone of the central banking system of an economy.

Where does the money come from? Have you ever wondered how money is created? How much money supply is required in the economy? Central banks create new money by printing new currency notes and manufacturing coins. Although paper and coin money can lose their value in these times of credit cards, debit cards, and online payment platforms, it is still the backbone for the economies of the world.

Money is a mystery for many people. Money began with the concept of bartering. Suppose you have rice in abundance but you require some split grains, some other person had split grains in abundance but was requiring rice. You and that person can exchange goods according to each other's requirements. This is how people started trading. Simultaneously, as the population started increasing it started becoming difficult for people to search for other people who had what they needed and simultaneously needing what they were having. With the increasing population, there came a common currency for the exchange of goods. This reduced the inherent difficulties and other limitations of bartering.

Therefore, countries started setting the value to paper currency, backing it with valuable commodities like gold or silver. This helped in international trading because a country that has made payment in paper currency, can exchange it for gold at an assured rate. The cash money which became available from these exchanged gold or silver can now be used for various day-to-day purposes. This way money came into use in terms of cash available with a person.

After reading all about where does money come from, do read where does light come from and where does magma come from.

What is money made from?

Central banks create money by printing and issuing it to the banking system. Money across the world is prepared from a wide range of materials. This encourages us to explore another dimension of the question where does the money come from? According to the data, the dollar bills printed in the United States are three-fourths cotton and one-fourth linen. The Australian dollar bill is prepared from a waterproof polymer while the currency notes in India are prepared from fine quality paper.

The notes for the Canadian dollar are prepared from a synthetic polymer material while pound notes in the UK are prepared from paper. Did you know that if your money does not generate any returns, its real value will reduce over your life due to inflation?

What is the rarest dollar bill?

While there are several types of dollar bills that are considered extremely rare in present times, it has pushed their value to another level. Out of the various dollar bills, the rarest dollar bill is the ladder dollar bill. Such is its rarity that the odds of finding a ladder dollar bill is less than 1 in 95 million notes!

What is a ladder dollar bill? A dollar bill serial number that runs for eight straight sequential digits is known as a ladder bill. For example, 01234567 or 23456789. Likewise, ladders can also be present in reverse order as well. 

The central bank of a country is responsible to print money.

Where do banks get all their money from?

Money itself is a made-up concept. It is sponsored by the government that issues it, governed by the central bank, and handled by the commercial banking system. This is what the whole world is running on. But, where does the banking system gets the money supply from, and how does a bank ensure that your money is safe?

You need to delve into how banks make money from their consumers. Is the monthly fee that the banks charge to their customers the only way for these banks to finance themselves? There’s more to this story. A bank creates money using your deposited money! But how is money created by commercial banks? Let's see how commercial banks drive the growth of the economy in the system.

Banks keep on making money from the money that was never of their own. You deposit cash in terms of paper currency and coins into your bank account, that exact amount of cash the bank lends out to others in terms of loans and mortgages. The borrower will have to pay interest to the bank, creating money in the process. The interest that comes from a loan or mortgage is where the bank is earning money from.

Banks have assured you with the fact that your hard-earned money will remain safe in their bank accounts. Banks provide you with various kinds of offers such as high-interest savings accounts so that you actually deposit your money to get the benefits from the bank.

Banks are also making money from financial charges, which is the fee generally charged by these banks every time you purchase products or services from merchants or shopkeepers through your debit card or credit card. This processing fee is getting paid to the bank by the merchants or shopkeepers. Moreover, banks make money through various kinds of fees like overdraft fees, late fees, ATM fees, minimum deposit limits, and monthly service fees. These banks even make money from the debit card or credit card that they provide you with for enjoying cashless facilities.

There are private banks, public banks, commercial banks, and private-public banks. Each type of bank provides a different kind of interest level to its customers through their policy schemes so that they deposit their cash money into their bank to earn money for themselves. For example, there are schemes under which different banks provide different loan interests so that more people are attracted to the bank that is taking the least interest over a loan or mortgage.

This helps them to gain profit as more people will be attracted to the bank that is lending them money at low interest. The bank always remains on the profit side. A bank has economic developments which in turn helps in the economic growth of the country.

Every bank is required to print a report including its balance sheets and details of assets, at the end of a financial year and deposit with the central bank. Economists and policymakers at the central bank study this report to determine the financial assets and power that the bank has and make policy decisions accordingly.

Where does lottery money come from?

A lottery can give you millions of dollars straight into your bank account, isn’t it amazing! But do you know where lottery money comes from? How lottery creates money? Let's quickly get into this.

Lottery money comes from you, yes you! Now you might be wondering how you can fund a lottery. People like you who purchase lottery tickets are the ones that are providing money to these lotteries. It is very simple mathematics, suppose the prize money of a particular lottery has been kept at 100 million dollars, and each lottery ticket costs $1, which appears to be cheap compared to the prize money, so most people pay this small amount of money in the hope of winning the prize money. Now, let’s assume that more than 100 million tickets are bought, which actually happens in most of the lotteries, and then the lottery has already made the money. The prize money is based on the number of tickets being purchased.

The ticket proceeds to create the prize pool. One-third of the lottery money is paid to the winner, while the rest of the cash goes into various government funds and education.

Here at Kidadl, we have carefully created lots of interesting family-friendly facts for everyone to enjoy! If you liked our suggestions for where does money come from? Curious currency facts for kids then why not take a look at stinking pup: how to remove skunk smell from dog or training your pup: how to stop a dog from pooping in the house.

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The Kidadl Team is made up of people from different walks of life, from different families and backgrounds, each with unique experiences and nuggets of wisdom to share with you. From lino cutting to surfing to children’s mental health, their hobbies and interests range far and wide. They are passionate about turning your everyday moments into memories and bringing you inspiring ideas to have fun with your family.

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