Imagine it is Eid, an aunt hands you a £20 note, and by the weekend you have turned that flimsy piece of paper into a new football, a kebab and still have change jingling in your pocket. Nobody would swap a football for a scrap of paper. So why does everyone accept it? That little puzzle is what money is really about.
Life before money: barter
Long ago, people bartered — they swapped goods directly. A baker with spare bread who wanted shoes had to find a shoemaker who happened to want bread, right then, in the right amounts. That lucky match is called the double coincidence of wants, and it almost never happened.
The three jobs money does
Money solves barter by doing three jobs at once:
- A medium of exchange — everyone accepts it, so you can sell one thing and buy another.
- A store of value — it holds its worth, so you can earn today and spend next month.
- A unit of account — it gives one measuring stick for prices, so you can compare a £3 sandwich with a £30 game.
From shells to smartphones
Money has taken many forms. Whatever the form, the job is the same.
| Form | When | Note |
|---|---|---|
| Shells, salt, cattle | Ancient | Hard to carry or divide |
| Gold and silver coins | Old | Valuable but heavy |
| Paper notes | Recent | Light; a promise of value |
| Cards and digital money | Today | Just numbers on a screen |
A £20 note is only special paper. It works because of one thing: trust. You accept it because you trust the next person will too, and because the Bank of England stands behind it. Take away that shared trust and the note becomes worthless. This is why good money also needs to be hard to fake, easy to carry, and steady in value: if anyone could print £20 notes, or if prices doubled every week, people would stop trusting it and it would fail at all three of its jobs.