PUBLIC AND PERSONAL FINANCE

MONEY means coins, notes and the cash

in a bank account-- what we use for making payments
for; what we want to buy.
We take money for granted; and, indeed, a society
as developed as ours could not do without it.

But people lived, and traded with each other, for many years without money. the earliest form
of trade was by barter, offering goods in exchange for what was wanted, or swooping goods
for other goods. Things beautiful and rare were desirable and valuable, and could be readily
taken in payment, e.g. precious stones, jewellery, golden cups. Useful things also had an
obvious value, which depended on their scarcity or how long they take to make. At different
times many rare or useful things have become widely used as mediums of exchange in many
parts of the world - axe heads, sharks’ teeth, beads, ivory, etc. Where people lived with herds,
they could count their wealth in ‘heads’ of cattle. The first gold coin in use was in the shape
of a cow’s hide, to represent the value of one cow.
Gold and silver gradually became recognised as particularly suitable for a medium of
exchange. They are scarce and so keep their value. They are soft metals, with low melting
temperature, that can be worked with primitive equipment. They can be polished to look
beautiful. They can be easily carried, e.g. in the form of necklaces, rings and bracelets. Also
they do not decay or rust, even if left in the ground for many years; they are a store of value.
It was gradually found most convenient to mint round flat pieces of gold and silver for
trading. A pattern stamped on them showed where they came from. The value of these ‘coins’
was measured by weight. Weighing the metal in scales every time a price was agreed, was a
long process, but necessary if no one could trust the weight of a coin.
Then, during the 6th century BC, king Croesus of Lydia (now part of modern Turkey, on the
east Mediterranean coast) decreed that coins should be a standard weight, size and shape for
each value, so that they could be quickly recognised. To ensure this, only the king would
have the right to mine gold and mint coins; it became a royal monopoly. The result was a new
confidence in the coinage that led to a great boom in trade, and prosperity. The Kingdom
grew rich. If people want to remark on someone’s wealth, they might still say, “He’s as rich
as Croesus”, even 26 century later.

Answer the questions:

1. What is meant by money?
2. What do you understand by Barter?
3. List 5 different things that have been used for exchange at different times.
4. Give 5 reasons why gold and silver were found so suitable as money.
5. How was the value of early gold coinage decided?
6. Who is said to have developed the first standard coinage?
7. Explain how our money is
a) a medium of exchange;
b) a store of value;
c) a measure of value.

1 Compiled by lecturers Vida Burbiene and Jurate Merkiene VIKO, Faculty of Economics, 2006
 PUBLIC AND PERSONAL FINANCE

COINS MUST BE:

1. SCARCE If money is too easy to come by - it doesn’t keep its value

2. ACCEPTABLE A coinage must be accepted as a medium of exchange in a society or
country, for buying and selling. For example: EURO, LITAS in
Lithuania.
3. DURABLE Coins must be strong and long-lasting, so that they are a store of value,
and do not break or wear out easily.
4. STANDARD Coins of a particular value must be of the same size, shape and weight,
` and be quickly recognisable.
5. PORTABLE Coins must be easy to carry.
The ruler of Sparta, Lycurgus, in the 9th century BC, decided that “the love of money was the
root of all evil” and that he would stop money-hoarding and usury (lending at high rates of
interest) by a decree that coins should be as large as cartwheels. He succeeded in stopping
hoarding - but trade came to a halt too. The ‘cure’ was worse than the disease Trade brings
prosperity and variety. So Sparta returned to a portable coinage.
6. DIVISIBLE. It must be possible to divide coins of large value into smaller values
to give change or make smaller purchases.

List the 6 qualities of a good coinage, and explain what is meant by each.
Then read the text given below and answer the following questions:
1. What would happen if coins were not portable?
2. How did banks develop?
3. What is a bank note?
Before there were banks, a wealthy man had the problem of how to keep his money safe. He
might ask the goldsmith, on of the few people with a strong room, to keep the money secure
behind his bolts and bars. The goldsmith would give a receipt for the money, and on request
make payment to others from these funds. Of course the goldsmith made a charge for these
services. As trade increased some goldsmiths went over entirely to dealing in money - safe-
keeping, change, arranging payments, etc. Banking in England was well established by the
end of the 17th century in the reign of Charles II.
The word “bank” came from “banco”, the bench or counter used by Italian money-changers.
The Lombard bankers from Lombardy in north Italy were leading bankers of the 13th century.
If a money lender could not meet his commitments, his bench would be broken up - hence the
word “bankrupt”. The bank had to keep a careful account of each client’s money. a receipt
was given to the depositor for an amount put into safekeeping. Gradually it became the
practice to issue these deposit receipt notes in standard amounts, e.g. £ 10, £ 50, £ 100. These
notes were very convenient, as they could be passed on, if one person owed money to another
and change hands many times in the course of trade, and still be good for payment, when
presented to the bank. This was the origin of bank notes. They came to be trusted; and
became usual in payment, as easier, lighter and quicker to handle than a lot of coins. A bank
note is a “promise” to pay” the bearer, by a bank.

PERSONAL FINANCE
2 Compiled by lecturers Vida Burbiene and Jurate Merk ene VIKO, Faculty of Economics, 2006
 PUBLIC AND PERSONAL FINANCE

MONEY - usually the lack of it - is a universal problem for travellers. Whatever the amount
you take there is a variety of ways to carry it since each has both advantages and
disadvantages, a combination of two or three is advisable, the mixture depending on financial
circumstances as well as destination.
TRAVELLER’S CHEQUES
Traveller’s cheques are cheques for a fixed amount of money, sold by a bank or a travel
agency, and easily exchanged for cash in foreign countries. Traveller’s cheques are insured
against loss and theft and are treated as cash by most businesses. The cheques will be replaced
within 24 hours if they are lost or stolen. You pay 1 to 1,5 % of the value of the cheque. You
usually get a better rate when cashing them. Traveller’s cheques can provide you a safe and
convenient way of travelling with large amount of money.
It is advisable to carry a small amount of foreign currency (for taxis, porters, telephone calls,
snack) until you get to a bank. The commission and rate of exchange do vary but shopping
around is rather impractical. Some countries restrict the amount of their currency that you can
import. You should have money for necessary expenses when you return.
BANK CARDS
CREDIT CARD is a plastic card which allows its holder to buy goods or services on credit and
to repay at fixed intervals. Credit cards are accepted by millions of business persons all over
the world though they vary in their acceptability: Barclaycard (linked to visa) is stronger in
France, Spain and Italy whereas Access is most useful in Germany and in the US. They can
be used for cash advances and instead of a deposit on car hire. They can be used at hotels,
restaurants, department stores, theatres, airline ticket offices - almost everywhere. They even
entitle owners to instant cash. The card holder simply asks a bank to charge a cash advance,
or loan, rather than a purchase to his or her account. The transaction is approved by phone
and the money handed over almost immediately.
VISA and MASTER CARD are the best known bank cards. They also most established, having
been first offered to consumers more than 25 years ago.
BANK ACCOUNTS
In a bank you usually have a CURRENT ACCOUNT which is one where you pay in your
salary and then withdraw money to pay you everyday bills. The bank sends you a regular
bank statement telling you how much money is in your account. You usually try to avoid
having an overdraft or you end up paying a lot of interest. If your account is overdrawn,
you can be said to be in the red (as opposed to in the black or in credit).
When you buy (or more formally, purchase) something in a shop, you usually pay for it
outright but sometimes you buy on credit.
Sometimes you may be offered a discount or reduction on something you buy at a shop.
You are often offered a discount if you buy in bulk.
If you buy something that you feel was very good value, it’s a bargain.
If you feel that it is definitely not worth what you paid for it, then you can call it a rip-off.
If you want to return something that you have bought to a shop, you may be given a refund.
You may also have a SAVINGS ACCOUNT where you deposit any extra money that you
have and only take money out when you want to spend it on something special.
Sometimes the bank can lend you money - this is called a bank loan. If the bank lends you
money to buy a house, that money is called a mortgage.

3 Compiled by lecturers Vida Burbiene and Jurate Merkiene VIKO, Faculty of Economics, 2006
 PUBLIC AND PERSONAL FINANCE

Exercise 1. Write the Lithuanian equivalents for these words and phrases:
the lack of ____________________ commission ____________________
amount ____________________ rate of exchange ____________________
is advisable ____________________ to charge ____________________
depending on ____________________ a cash advance____________________
circumstances ____________________ impractical ____________________
destination ____________________ restrict ____________________
repay ____________________ expenses ____________________
fixed ____________________ are excepted by ____________________
denomination ____________________ entitle owners ____________________
treated as cash ____________________ instant cash ____________________
transaction ____________________ replaced by ____________________
the money handed over _______________________________________
is approved by phone _______________________________________
insured against loss and theft _______________________________________

Exercise 2. Chose and insert suitable word in the gap:

1. The _________________of money is usually a _________________ problem of travellers.
credit lack card universal
2. There are several ways to ____________ the money whatever _______________ they
take.
amount owner carry depend
3. The way of carrying it _______________ on financial ________________ and destination.
depends transaction circumstances exchange
4. The ___________ of the money from the credit card can be _______________ by phone.
cash approved transaction exchanged
5. Traveller’s _______________________ are sold by bank or a travel
__________________.
goods loss cheques agency
6. They are easily ____________________ for ____________________ in foreign countries.
cash consumer amount exchanged
7. Traveller’s cheques are ____________________ against ___________________ and theft.
provided insured loss currency
8. It is ____________to have a small amount of foreign ___________ until you get to a bank.
loss theft advisable currency
9. Credit card allows its _____________ to pay for goods and services on _______________.
cheques owner credit agency
10. Visa and Master __________ first were offered to ____________more than 25 years ago.
consumer card cheques travellers

4 Compiled by lecturers Vida Burbiene and Jurate Merk ene VIKO, Faculty of Economics, 2006
 PUBLIC AND PERSONAL FINANCE

PUBLIC FINANCE
The government collects money from citizens through taxes.
 Income tax is the tax collected on wages and salaries.
 Inheritance tax is collected on what people inherit from others.
 Customs or excise duties have to be paid on goods imported from other countries.
 VAT or value added tax is a tax paid on most goods and services when they are bought
or purchased.
 Corporation tax is the tax paid by companies on their profits.
If you pay too much tax, you should be given some money back, a tax rebate.
The government also sometimes pays out money to people in need:
 unemployment benefit (the dole - informal)
 disability allowance money paid to people with a handicap
 student grant money given by the government for education
 pension money paid to people after a certain age.
 child benefit money paid towards the cost of raising a family
 the money paid for professional services (to a doctor), is usually called a fee or fees;
 the money paid while travelling on public transport is a fare;
 the money paid for breaking the law, as a punishment is called a fine.

Exercise 3. Complete the sentences:

1. Money which has to be paid on what you inherit is known as _______________________.
2. You paid too much tax last year so you should get a ______________________________.
3. Taxes collected on wages and salaries is called __________________________________.
4. Disability allowance is money paid by the government to __________________________.
5. Child benefit is money paid towards ___________________________________________.

Exercise 4. Give the names for the defined money expressions:

1. a fixed amount which is paid, usually monthly, to workers s __ __ __ __ __
of higher rank
2. money which is in the form of coins and notes, not cheques c __ __ __
3. a sum of money which is owed to someone d __ __ __
4. an amount of money which you lend to someone l __ __ __
5. money paid by divorced father to his former wife for
the upkeep of his children __ __ __ __ __ _ y
6. a sum paid at a restaurant after eating __ __ __ l
7. an amount of money you receive, usually weekly,
in return for your labour or service w __ __ __
8. tax on imported articles paid to Customs __ __ __y
9. money paid by the government to students g __ __ __ __
10. money paid by a company or state on your retirement p __ __ __ __
__ __
11. a sum paid as a punishment for breaking the law f __ __ __
12. money paid for professional service f __ __
13. a sum of money paid while travelling on public transport f __ __ __

5 Compiled by lecturers Vida Burbiene and Jurate Merkiene VIKO, Faculty of Economics, 2006
 PUBLIC AND PERSONAL FINANCE

Exercise 5. Match the definitions with the correct money word:

1. an allowance a) money paid to authors or inventors according to the sales of
their work;
2. a bonus b) a sum of money used to make more money from something
that will increase in value;
3. commission c) the money which a building society or bank lends to someone
to buy a house;
4. a deposit d) the money that a person pays to an insurance company
to protect against loss or damage
5. a dividend e) money, usually from a relative, to live on;
6. an investment f) an additional payment which is a reward to those who work for
a company for their extra work;
7. a legacy g) the amount of money borrowed from a bank, a greater than that
which is in your account;
8. maintenance h) money received from someone in his or her will;
9. an overdraft I) the amount of money that goes to a shareholder;
10. a premium j) money paid by divorced or separated people to support the former
husband or wife;
11. royalties k) part of the value of a company that you may buy;
12. a share l) part payment of money which you make to stop the seller
from selling his goods or others;
13. a mortgage m) an amount of money, related to the value of goods sold, which is
paid to a salesman for his service.

Exercise 6. Put each of the following words or phrases into its correct place:
banks beads buy coins exchange rate currency
depositing earn change goods investments money
paper bills savings accounts sell shells value

MONEY
1) Money is what people use to _____________________________ things.
2) People spend money on ____________________________ and services.
3) Many people save part of their money by ________________ it in a bank.
4) People ______________________________ money by performing services.
5) They also earn money from _______________________________________.
6) ____________ can be anything that people agree to accept in exchange for the
things they ____________ or the work they do.
7) Ancient peoples used varied things as _____________, ___________, __________,
and cattle as money.
8) Today, most nations use metal coins and ________________________.
9) Different countries’ _____________ and bills look different and have different
names.
10) A person can ___________ his money of any country according to the
___________.
11) Usually, such rates are set by the central __________ of a country.
12) The ___________ of a country’s ___________ may change, depending on the
economic and political conditions in that country.

6 Compiled by lecturers Vida Burbiene and Jurate Merk ene VIKO, Faculty of Economics, 2006
 PUBLIC AND PERSONAL FINANCE

TEST YOURSELF
TASK ONE. Insert proper words:
1. When you buy or ______ something in a shop, you usually pay for it _______ or on
_______. 2. It is not usual to _______ about prices in a shop. 3. If you buy something
that you feel was very good value, it a _______. 4. If you feel that it is definitely not
_______ what you have paid for it, than you call it _______. 5. If you want to ________
something which you have bought to a shop, you may be given a _______. 6. Sometimes
you may be offered a _______ or a _______ on something you buy in a shop. 7. In a bank
you usually have a current account, which is one you ______ and then _____ money to
pay your every day _____. 8. The bank sends you a regular bank _______ telling you
________ money is in your ________. 9. You may have a ______ account where you
_______ your ______ money that you have and only take money out when you want to
______ it ______ something special. 10. You usually try to avoid having an ______ or
you end up paying a lot of ________. 11. If your account is ______ you can be said to be
in the _________.
TASK TWO. The government collects money from citizens through taxes.
List the taxes you know and write what are these taxes paid on.
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
TASK THREE. Complete the sentences:
1. If you have some money in your account you are in
________________________.
2. If the bank lends you money you have a bank _____________________________.
3. If you paid too much tax last year, you must get a
__________________________.
4. If you brake the law you pay a
_________________________________________.
5. If you travel on public transport you pay a________________________________.
TASK FOUR. Give the names for the defined money expressions:
1. a fixed amount which is paid, usually monthly, to workers;
2. an amount of money you receive usually weekly, in return for labour or service;
3. an amount of money which you lend to someone;
4. a sum of money which is owed to someone;
5. money paid at a restaurant after eating;
6. extra percentage paid on a loan;
7. money paid by a company on retirement;
8. money paid towards the cost of raising a family;

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 PUBLIC AND PERSONAL FINANCE

9. money paid to people with a handicap;

10. an amount of money given as a loan to purchase property.
11. tax on imported articles paid to the Customs.

8 Compiled by lecturers Vida Burbiene and Jurate Merk ene VIKO, Faculty of Economics, 2006