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- Understanding Finance
Wealth, Money and Bank
Money and Banking System
What is wealth?
Wealth is money plus valuable items that a person possesses. Valuable items may be living things and non-living things. Wealth is also considered that generates income. Except human all other living things that generate income can be considered wealth like livestock. Any thing that has value is also considered wealth. Land and building, gold, silver, jewelry, furniture fixtures every items that have value is wealth.
What is Money?
Money is modern concept. Wealth is evaluated in term of money. Paper money is new concept. Gold and silver were used to buy and sell items before paper money was introduced. Paper money is guaranteed by the government that if some one wants equivalent of paper money 'real money will be given immediately'. This is something like a cheque or credit card backed by bank deposits.
Prior to introduction of money there was barter system under which commodities were exchanged for commodities, such as rice with vegetable, fruits with rice, etc. If some one has rice and needs vegetables; the person has to look for a person who has vegetables and wants to exchange with rice. Because of these complications money was introduced. Money was made of gold and silver. Gold and silver are valuable materials since long time. Every body accepts these precious materials. Precious materials are not free from problems. It involves wear and tear on the one hand; on the other hand it is in convenient to carry because of its weight. So paper money was introduced.
What is Bank?
Bank is an institution that works on money transactions. Banks help in all monetary matters and financial transactions. Banks helped people to keep money safe in the form of deposit. Banks provide interest on deposit money. Banks earn money investing in different activities out of public deposits. Banks also help people providing money in the form of loan with interest. Banks provides different type of services with service charges such as transfer of money from one place to another, from one person to another, called accounts transfer.
A bank itself does not have money except its own capital. It does business out of other’s money. It collects savings from public and channelizes to provide loan to those who needed for business and industry. Banks play important role in development of industry and commerce in a country.