Functions of Money

In this age where greed overtakes all human emotions, there is no need to define money. However for the sake of simplicity money refers to anything which has value and can be used by people to buy things which they want. Money performs several important functions let’s look at some of the functions of money –

  1. The first and foremost function which the money performs is to make possible the exchange of goods and services between people. Without money there cannot be any exchange and it would impossible for humans to survive without exchange of goods and services.
  2. It is due to money that all payments can be deferred and settled into future, and therefore money eases the flow of trade or exchange between people.
  3. Whether one likes it or not money serve as important tool to measuring performance, in other words people acknowledge success only when it is backed by money. Whether it’s a big company or an individual, all work to achieve one thing and that is money.
  4. Money helps in achieving an ideal balance between savings and investments of the economy of a country because at any point of time there are people who have excess money and therefore they save money and at the other side there are people who are in need of money because they want to invest and money helps both by allowing people with excess cash to save and giving it to people to invest.
  5. Money also performs an important function of store of value because money unlike goods is not perishable and therefore they are can be stored in order to purchase goods and services at a future date by human beings.

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