Cash

If the coins and notes in your pocket or wallet make up the majority of your money, you are in an unusual position. For most people, it is a small amount compared to what’s in the bank.

Coins and notes, like all money, are useful only because they represent value. At some points in history, materials such as gold and silver have been used as forms of exchange in themselves. Even this has depended on a shared view of the metal’s value.

Paper money first appeared under the Chinese Song dynasty around 900 years ago. It was originally a form of IOU – a guarantee that you would be given the coins in time. But as coins are themselves symbolic of value, there was no need for an extra level of symbolism and notes soon assumed the same function as coins. A similar process occurred when paper money became widespread in Europe several centuries later. Even now, Bank of England notes declare “I promise to pay the bearer on demand”, followed by the Chief Cashier’s signature.

There are obvious good reasons for not carrying too much cash around, including convenience and security. The advantage of paying by cash is the anonymity. If you pay by card or electronic transfer, the bank – and any government authority that monitors the internet – knows what you are spending.