💰 Everyone Uses Money Every Day. But What Actually Is It?
Most people think money is the €10 note in their wallet or the coins in their pocket.
But here's a surprising fact:
Most money in Ireland doesn't exist as cash.
In fact, when your salary arrives in your bank account, no physical notes are moving around. The money exists mainly as numbers stored in banking systems.
So, what exactly is money?
What Is Money?
Money is simply a tool that helps people exchange value.
Imagine you grow potatoes and I build bicycles.
Without money, you would need to find someone who wants potatoes and happens to have a bicycle to trade.
That would be difficult.
Money solves this problem by acting as a common language of value.
Instead of trading potatoes for bicycles, you sell potatoes for money and then use that money to buy a bicycle.
The Main Types of Money
1. Cash
This is the money we can touch:
☑ Notes
☑ Coins
This is the type most people think about when they hear the word "money".
2. Digital Money
This money represents currency in an electronic format stored and transferred through computer networks.
Examples:
Your salary
Your savings account
Your current account balance
Digital money is becoming increasingly common as fewer people carry cash.
Hereafter is an example of Cash currency vs Digital money created in Ireland (Based on Central bank of Ireland – July 2026)
Figure: Currency Cash vs (Current accounts + Savings)
Why Do People Think Money Is Cash?
Because cash is visible.
As adults, we continue to associate money with physical notes even though most of our financial life happens digitally.
The reality is that cash is only one form of money, not money itself.
How Is Money Created?
Many people believe governments print all the money.
The reality is more interesting.
Some money is created by central banks in the form of banknotes and coins.
But most modern money is created when banks issue loans.
Quick example to understand:
You borrow €300,000 for a house.
The bank doesn't hand you a truck full of cash.
Instead, the bank credits your account with €300,000.
New money has effectively been created within the banking system.
How does digital money disappear?
Now suppose after many years you repay the mortgage.
Every repayment reduces:
Your bank deposit
The outstanding loan
When the loan principal is fully repaid:
That money effectively disappears from the banking system.
Many explanations of modern banking describe loan repayment as destroying the money that was originally created when the loan was issued
One Thing To Remember
The next time you check your bank account, remember:
Money is not the paper in your wallet. Money is a system that allows people to store value and exchange it with others.
Understanding this simple idea is the first step toward understanding saving, investing, banking, and how the financial world really works.