 What is money? Money is a commodity used for payment in exchange for goods and services. In South Africa, we think of money as rands and cents and prices are expressed in these terms. What did people use before money? For many years, before money was placed in circulation, barter was the only form of trade. Goods were exchanged for goods. For instance, three bags of maize for one sheep. This was a slow and inefficient way of trading as the needs of people do not always correspond. The person parting with the sheep may want chickens in exchange rather than maize. The use of precious metal coins replaced barter trade. Gold and silver coins were minted and used in trade with each coin trading according to its value in gold or silver. At the time, the price of gold and silver was fixed and the value of the coins therefore remained constant. As these coins were heavy to carry around, people deposited these coins with precious metal dealers in exchange for deposit receipts. After some time, these receipts issued to bearer were used in trading rather than to retrieve gold or silver every time a transaction was done. From these tradable receipts, banknotes were developed. The first banknotes were issued by commercial banks which took over the function of storing precious metals. These banknotes were convertible on demand into gold of the same value at the issuing bank. Who has the right to issue banknotes and coins? In South Africa, commercial banks issued banknotes until 1922 when the function was taken over by the SA Reserve Bank, the country's central bank established in 1921 for this purpose. Since 1932, the value of South African banknotes rests on trust. When a person accepts a banknote in exchange for goods and services, there is reasonable trust that the banknote will again be exchangeable for goods and services of similar value or will be accepted as a deposit by a commercial bank with similar value reflected in a bank account. Money has three basic functions which we will look at next. Means of exchange. Money plays a crucial role in any economy as it is an easy means of exchange when people trade. Without money, only barter trade, goods exchanged for goods, can take place which is a slow and cumbersome process. In trade, not only banknotes and coins are important forms of money, but bank deposits and available credit, for instance the unused balance on a credit card are also available for purposes of trade. Many people trade by means of internet banking or debit and credit cards and hardly use banknotes and coins. For the purpose of trade, money can therefore take many forms and the choice of which form to use is determined by convenience. Store of value. Money serves as a store of value. Savings are determined in terms of money values while the same holds true for investments. Debt are also expressed in terms of money. Unit of account. The value of items and the prices of goods and services are expressed in terms of money. For instance, the price of bread is stated as 12 rand 95 cents at your local store or the value of cleaning your dad's car is worth 50 rand to him. Likewise, remuneration is determined in monetary terms, for instance 5,000 rand per month. The implication is that money serves as a common denominator to express cost, value and income. In expressing cost, value and income in one common measurement, it is also possible to make comparisons to determine what is expensive and what is cheap. Conclusion. Money is therefore very important in every modern economy and oils the wheels of exchange. It is not without reason that the expression is money makes the world go round.