Ask Aubie


Ask Aubie encourages elementary school-age children to submit educational questions to Auburn University’s tiger mascot Aubie. An AU professor with knowledge in the related field is then tapped to “help Aubie” answer the question. Questions may be submitted to askaubie@auburn.edu.

QUESTION	May 11, 2005

Dear Aubie, What makes our money valuable? Tripp Isbell Mrs. Duncan's 3rd grade class Yarborough Elementary School Auburn


ANSWER

	Helping Aubie this week is: Dr. John Jahera, Colonial Bank Professor of Finance, with AU's College of Business.

Dear Tripp, To understand why there is value to money, we need to first define what we mean by money. In general, anything that can be used to pay for goods, services or other items, can be considered money. Today, in the United States, we consider coins and currency as our money since that is what we use when we buy food at grocery stores, clothes at department stores or video games at video stores. Increasingly, the use of debit cards is replacing the use of actual coins and currency. Most stores will accept debit cards just as they accept coins and currency. Now, why does money have value? Money has value since individuals understand that our money in the U.S. will be accepted in return for goods and services. So the value is really because people are confident that they can use money they receive from their jobs or investments to then purchase goods and services and to pay bills they owe for such things as electricity and water. Our currency though is just paper and coins are just metal. It is the ability to use them in exchange for things we want or need that gives them value. Money is then used as a medium of exchange, meaning you can buy things and pay bills with money. It is also a way of building value since you can save money and earn interest or dividends on the money invested. Without money, we would have to barter or trade for everything. For example, if you needed milk and the dairy needed bread, then you might have to exchange your bread for milk. If you didn't have bread, then you couldn't get the milk you needed. With money though, you could pay for the milk to the dairy and then the dairy could use the money they received to go out and buy the bread. So it is really the fact that money can be readily exchanged for a variety of goods and services that gives it value. As long as individuals have confidence that their money can be used in that way, then the money will have value. Thanks for your question, Aubie and Dr. Jahera

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