The History of Money: Children's Edition

“She immediately understood the significance: sound money is based on weight. When irresponsible banks and the government print up a bunch of paper notes, they devalue the money because there's way more money than gold and silver.” – The Magic Coin

Most children begin to learn about money management through many vehicles.  A piggy bank to collect their coins, or an allowance earned through the completion of chores.  Budgeting may even help children save money for a desired toy.  Eventually, a child may even receive a savings account to assist in their path to financial security.   

In Jonathan Newman’s 2025 book, “The Magic Coin”, Newman tells the children’s version of the history of money through the travels of a girl named Lily who found a magic coin that would teach her how money developed in the market economy to replace barter and trade.  Based on Murray Rothbard’s 1963 book, “What Has Government Done With Our Money?”, this children’s tale, suitable for children ages 4-18, warns of how the government usurped the production of money for its own means.  

In Murray Rothbard’s 1963 book, “What Has Government Done To Our Money?” Rothbard tells of the many ways that government intervention in the monetary system has led to chronic instability.    The expansion of the money supply through the establishment of central banking has brought the nation inflation, a tax on its citizens.  With money reaching the rich first, it has also added to inequality.  It is the creator of booms and busts and has driven our current debt and deficit crisis.  Nixon’s ending of the gold standard permanently untethered money from gold, creating a fiat money supply backed by nothing but government promises. The only way to solve this crisis is to return to sound banking by removing government from its control.

Primitive society began with bartering and trade to help meet individual needs.  Expansion and growth made the direct exchange of goods obsolete, leading to indirect exchanges among many to address greater needs. Eventually, a medium of exchange was created, first using coins for their durability and divisibility, before moving to paper money for its increased ease.  All was recognizable and accepted as an exchange.  Money thus emerged in the free market to make trade easier.  As a result, business opportunities grew, providing more goods for more consumers.  As prices emerged, comparable costs gave the consumer more knowledge to make individual decisions. 

Government intervention in the use of money began with the minting of coins, where they first began to whittle their edges for personal profit.  Banking, which initially existed to store money for consumers, eventually evolved into a fractional-reserve banking system, in which banks began printing more notes than gold in their vaults, keeping a mere fraction of the total loaned available for withdrawal.  Central banks allowed this practice to continue by increasing the money supply in circulation at the benefit of banks.  This not only led to inflation and an unstable environment, but also paid for warfare and welfare, and the promise of goods to buy votes, all while devaluing money.

As Lily traverses through time, she learns not only about the origins and history of money but, more importantly, the dangers of government.  Money arose organically from trade and barter and met the needs of businesses and consumers alike.  That is, until the government took over its management and turned it into a vehicle to grow its own power. 

To restore fiscal responsibility with money, we must return to a time before the government took over the monetary system.  Under a 100% reserve banking approach, with a one to one gold to notes ratio, the government was unable to increase the money supply.  Gold stock was limited, with increases only available through mining (i.e., production), leading to a stable financial system.  A return to gold-backed money would stabilize the economy and make savings more valuable.   

Eventually, as children grow older, their parents may teach them about the dangers of using too much credit or taking on risky loans.  Whatever path they take in their financial instruction, it's never too early to teach children about the basics of money or the dangers of government.