How You Use Money

Three characteristics of money in general to fundamentally understand for thinking about money.

Medium of Exchange (MoE)

Instead of barter an item for another item, money is used as a medium of exchange (MoE) that is easy to carry around and is easily divisible. Also, the currency is fungible if the value ismthe same, whether it is 1 x $5 note or 5 x $1 coin. The five dollars is worth five dollars in either denominations.

MoE is our most basic use of money.

Store of Value (SoV)

When we want to maintain our purchasing power, we place our money into an asset that acts as a store of value (SoV). SoV items try to at least perform as well as the rate of inflation.

A defensive SoV item is gold. Less liquid SoV is property.

Unit of Account (UoA)

The unit of measurement of wealth. People might use their local curremcy as the unit of account (UoA) or perhaps a larger global currency if it is easier because of assets and earnings being scattered across various jurisdictions.