What You Need to Learn
- Define money and understand its four functions
- Know the features that make something useful as money
- Understand decimalisation and when it happened
- Know different payment methods and their pros/cons
💰 What is Money?
B Ben's Savings Goal
"I get pocket money in cash from my parents once a week. I also earn cash mowing my neighbours' lawns. My goal is to save enough to buy a smartphone. Mum and Dad promised to match whatever I save by the end of the year!"
Money isn't just coins and notes - it's anything accepted as payment. Ben's pocket money is physical cash, but when he puts it in his building society account, it becomes an electronic balance he can access with a card.
📊 Ben's Money in Different Forms
| Cash in wallet | £15 |
| Building society account (electronic) | £230 |
| Money jar at home | £8.50 |
| Total money Ben has | £253.50 |
📋 The Four Functions of Money
| Function | What It Means | Baker Family Example |
|---|---|---|
| Medium of Exchange | You can swap it for goods and services | Ben uses money to buy a smartphone |
| Store of Value | It keeps its worth over time (you can save it) | Ben saves money in his building society account |
| Unit of Account | It measures the value of things | The phone costs £300, the case costs £15 |
| Method of Deferred Payment | You can use it to pay debts later | Sue pays her credit card bill at the end of the month |
💡 Memory Tip: Think MSUM - Medium of exchange, Store of value, Unit of account, Method of deferred payment
Quick Check: Functions of Money
✅ Features of Money
For something to work well as money, it needs certain features:
| Feature | Why It Matters | Example |
|---|---|---|
| Acceptable | People must be willing to take it as payment | Shops accept £ but might not accept foreign currency |
| Durable | It must last and not fall apart | UK notes are made from polymer plastic, not paper |
| Divisible | Can be split into smaller amounts | £1 can be divided into 100 pence |
| Portable | Easy to carry around | Coins fit in your pocket; cards are even easier |
| Scarce | Limited supply keeps it valuable | The Bank of England controls how much is printed |
| Difficult to Counterfeit | Hard to make fake versions | Notes have holograms, watermarks, special features |
Card Sort: Why These Features Matter
📅 Decimalisation
🎯 EXAM ALERT: 45% of students got this wrong! Decimalisation was in the 1970s, NOT the 1960s. The exact date was 15 February 1971.
P Philippe Remembers Decimalisation
"I remember Decimal Day - 15 February 1971. Before that, we had pounds, shillings and pence. There were 12 pence in a shilling and 20 shillings in a pound - so 240 old pence in a pound! It was confusing. After decimalisation, there were just 100 new pence in a pound. Much simpler!"
📊 Before vs After Decimalisation
| Before (pre-1971) | |
| 240 old pence = £1 | |
| 12 pence = 1 shilling | |
| 20 shillings = £1 | |
| After (15 Feb 1971) | |
| 100 new pence = £1 |
Quick Check: Decimalisation
💳 Payment Methods
Chloe's Market Stall Scenario
"Chloe runs a market stall selling handmade jewellery. Her stall has NO electricity, so she can't use a card machine. What payment methods can she accept from customers?"
🤔 What Can Chloe Accept?
Without electricity, Chloe cannot process card payments. She can only accept:
- ✅ Cash - No power needed
- ✅ Cheque - Written payment, processed later
- ❌ Debit card - Needs card reader + power/internet
- ❌ Credit card - Needs card reader + power/internet
- ❌ Contactless - Needs card reader + power/internet
🎯 EXAM TIP: This is a common scenario! Remember: market stalls, car boot sales, and other places WITHOUT electricity can only take CASH or CHEQUES.
Comparing Payment Methods
| Method | Advantages | Disadvantages |
|---|---|---|
| Cash | Accepted everywhere; no fees; anonymous; works without power | Can be lost/stolen; heavy to carry; need exact change |
| Debit Card | Convenient; safer than cash; instant payment from your account | Needs power/internet; can be declined if no funds |
| Credit Card | Buy now pay later; purchase protection; builds credit history | High interest if not paid off; temptation to overspend |
| Cheque | No power needed; paper record; can post payments | Slow to clear; can bounce; declining acceptance |
| Bank Transfer | Secure; good for large amounts; instant with Faster Payments | Need bank details; harder to reverse if wrong |
| Mobile Payment | Very convenient; fast; don't need card | Phone battery can die; not accepted everywhere |
Card Sort: Cash Advantages vs Disadvantages
🎯 Scenario: Choosing Payment Methods
DS Daniel and Sue's Payment Choices
Different situations, different payment methods:
| Weekly supermarket shop (£120) | Debit card |
| Window cleaner (£15) | Cash |
| New sofa (£800) | Credit card (protection) |
| Paying the builder (£5,000) | Bank transfer |
| Ben's pocket money | Cash |
| Buying coffee | Contactless |
True or False
Fill in the Blanks
Flip Cards: Key Terms
📝 Practice Quiz
📚 Summary
| Topic | Key Points |
|---|---|
| Four Functions | Medium of exchange, Store of value, Unit of account, Method of deferred payment |
| Features | Acceptable, Durable, Divisible, Portable, Scarce, Hard to counterfeit |
| Decimalisation | 15 February 1971 - changed from 240 pence per £ to 100 pence per £ |
| No Electricity | Market stalls can only accept CASH or CHEQUES |