08.05.2025
Money plays a central role in our daily lives. But what exactly is money, where does it come from and how is it actually created? In this article, you will find a clear and simple explanation of the roles that money performs and why it’s so important to our society.
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Money is a lot more than just the coins and bank notes we carry in our pocket. It’s a central element of our economy and society. But what exactly is money? Originally, money served as an exchange medium and enabled trading without having to rely on direct exchange of goods and services. Today, the term includes not just cash, but also book money, which we are familiar with from bank transfers, and digital money in the form of cryptocurrencies.
The history of money dates back thousands of years. To begin with, humans exchanged goods with each other directly – an often impractical system. As an example: someone had bread and wanted to swap it for fish. But what’s the problem with this? It wasn’t easy to find somebody who wanted exactly what you had − and who also had what you needed at the same time. To help facilitate trade, people started using commodity money or money in kind with intrinsic value, such as mussels, salt and precious metals. These served as a generally accepted payment method. The baker could now sell bread, receive commodity money for it and use this to acquire what they needed – such as shoes or vegetables. However, increasing trade and a growing economy meant that payment methods also had to develop. Money was invented.
In the 7th century BC, the first coins from silver and gold were minted in Asia Minor. They solved the problem of establishing value in trade. However, coins were difficult to transport. This led to the first state-issued paper money appearing in China in the 11th century. Bank notes took off in Europe from the 17th century, when banks began issuing receipts for deposited coins.
With the introduction of paper money, the need for trustworthy institutions to monitor the money in circulation grew. Some of the first central banks in the modern sense of the word include the Hamburger Bank, the Swedish Riksbank and the Bank of England, founded in 1619, 1668 and 1694 respectively. These were particularly influential in the development of modern central banking structures and served as a prototype for other countries. The Swiss National Bank (SNB) followed in 1906. This bank is responsible for the monetary and currency policies in our country and is the only institution authorized to issue Swiss coins and bank notes. It also has the task of ensuring price stability. This is important to maintain the value or purchasing power of our currency – in other words, how many goods or services we can acquire for a certain amount of money.
Our modern monetary system is based on fiat money, which is money created artificially by governments and central banks.
In the 20th and 21st centuries, the financial system underwent another transformation: electronic payment methods and digital currencies became more prominent. As examples, the first credit card was introduced in the USA in 1950, and 2009 saw Bitcoin arrive on the market as the first cryptocurrency. It’s hard to imagine life today without digital payments and digital currencies.
Money comes mainly from two mechanisms: firstly, the central bank issues cash, and secondly, commercial banks create new book money by issuing credit. This means that money is not created just by printing bank notes, but mainly by issuing credit. When a commercial bank lends money to a company or individual, new money is created that didn’t exist before. This money stays in circulation until the credit is repaid – and only then does it actually disappear again from the cycle.
Money isn’t just an abstract concept – it influences our daily lives, our decisions and our priorities. We need it to pay our rent, do our shopping, make long-term investments and save for later. It also unlocks access to education and enables us to travel or just to take part in social life. As such, money is a key factor in our quality of life and societal cohesion. Studies shows that financial stability is directly linked to our well-being and happiness.
There has been a significant change in how we deal with money in recent years. The way we make payments, for example, is changing rapidly. Whereas people used to pay with cash while out and about, the majority now pay using electronic payment methods. According to Swiss Payment Monitor, mobile payments are becoming more and more common in Switzerland – and TWINT is the most popular option. Increasing numbers of people also own cryptocurrencies such as Bitcoin or Ethereum. This clearly shows that we are in an era of change, with cash slowly but steadily becoming less popular.
Money is a lot more than just a payment method. It’s a central pillar of our society. The better we understand how money works, the better we can handle it – whether it’s for daily expenditure, saving or investing. With the right knowledge, investing doesn’t have to be complicated.
