Grade 3-5

You Can BANK on This! (Part 1)

Updated: January 31 2017,
Author: Mickey Ebert

Banking should not be confusing. It should be INTERESTing! Most students in the elementary grades would love to know more about checking accounts, ATMs, credit cards and all the ways in which their relatives buy the stuff that they want. This lesson provides the students with information on banking; it also allows them to try out some procedures for thinking about money and banking.



Part 1

Part 2

Part 3

Banking and money should not be a mystery to our students. They see evidence of both every day. Yet, a lot of our children have misconceptions about money and banking. Some of these misconceptions can be cleared up with this lesson, based on an online module.

Learning Objectives

  • Apply characteristics of money.
  • Compare/contrast money and barter.
  • Explain components of M1.

Resource List

  • Banking on Our Future: Students will use this interactive website to learn and explore more about banking. Note: The students will have to go through a free sign-up process in order to use the website. Here are the fields that students will be required to fill out: Name, Title, Gender, User Name, Password, Secret Question, How You Heard About the Site, and Why You Picked the Site.


A few basic concepts are the premise for this lesson.

  1. Money is a form of an exchange and it is widely used because bartering is not as efficient.
  2. To serve efficiently as a medium of exchange, money must have four characteristics: It must be generally accepted, durable, easy to carry and easily divided.
  3. M1 is what we call the money supply. It is all the coins, paper money and balances of checking accounts in all the banks.

Tell the students that tobacco was once used for money. Ask them why tobacco was not an efficient form of money. In this lesson, they will find ouquartert why tobacco and other goods are no longer used as money.

A long time ago, people didn't have money like we do now. They had to use other things to make exchanges. This is what we call BARTERING. A baker wanted fish for dinner. A fisherman wanted bread with his dinner. The baker traded a loaf of bread for the fish that the fisherman caught. They were both happy with their trade.

Bartering was not very efficient. When you used bartering you couldn't make change, you were limited in what you could exchange and the items you used for bartering might be hard to carry around.

Luckily, someone came up with the idea of money. Chunks of precious metals (such as gold and silver) were first used. Precious metals were thought to be valuable by a lot of people. For that reason precious metals worked pretty well as money. They were relatively easy to carry, durable and could be divided into items of different weights. However, different metals were worth different amounts: every time there was an exchange the metals had to be weighed.

Then coins were minted. Coins usually were standardized in weight and size and everyone accepted them. They were just scarce enough that people couldn't get all they wanted. But carrying around a large amount of coins was dangerous, and coins were heavy. People needed to think of a different way to make exchanges. Some people started leaving their coins with goldsmiths in their town. The goldsmith would give the people a piece of paper as a receipt. Pretty soon people were exchanging that piece of paper for a good or service. That is how paper money came to be!

piggy bankEventually, governments started issuing paper money and coins. The government declared what each coin or bill was worth, and the people started accepting that money. When money is generally accepted, and it is not easily torn or broken, and it can be carried around without too much of an effort, and it can be broken into smaller amounts–then that is when you have a money system that works!

In fact, those are the four characteristics of money. Money must be generally accepted, durable, easy to carry (portable) and easily divided (divisible).

Now ask the students to think about tobacco again. Was it generally accepted? [Yes.] Was it durable? [No, it crumbled.] Was it easy to carry around? [It could blow away and it could be bulky to carry.] Was it easily divided? [Maybe, but if somebody wanted the whole leaf, then it would be hard to divide it]

Wampum was used as money by the Native Americans. It was also used for adornment and for marriage proposals. Lead the students into a discussion about wampum: analyze wampum according to the four characteristics money must have. The students should conclude that wampum served efficiently as a form of money for Native Americans.

Credit cards are not considered money because they are not accepted everywhere and because you incur debt when you money baguse a credit card.

Most adults use a bank to help them manage their money. Banks have a lot to do with the MONEY SUPPLY in the United States. The money supply is actually called M1. M1 is all the coins, paper money and balances of checking accounts. Here's an interesting fact. Think of all the coins in the country. Now think of all the paper money in the country. Now think of all the money in banks that people have in their checking accounts. Can you guess where most of our M1 (money supply) is? About 2/3 of our money supply is in checking accounts! Wow, that's a lot of dough!

Now that the students know all about money–what it is, how to get it, and what to do with it once you get it–they are ready to use that knowledge!

Have them go to the Hands On Banking website website and click on the Savings & Checking Account Guide. At the bottom of the screen, you'll see a Contents Icon.  Select a lesson such as, Lesson 4: What Banks Do.


The students should be familiar with the money basics when they finish the lesson. They should be able to tell you why bartering was not an efficient method of making exchanges, why money was better and what our money supply is called.

Extension Activity


The students should know the four characteristics of an efficient money system. Have your students complete this activity to apply their knowledge of the four characteristics as they apply to shells, salt and grain. The activity allows the students to determine whether those items are scarce, durable, easy to carry (portable) and easily divided (divisible). Advise your students that the activity pertains to shells, salt and grain as those items were used in a monetary system in the past, not according to the value and characteristics those items hold today.

Next have the students use the Venn Diagram to compare/contrast the use of money and bartering.