Characteristics of Money

Money is any asset that is generally acceptable as a means of payment to settle transactions as well as a medium of exchange. It is anything that is generally acceptable for payment of debts. Many people confuse money with cash; but cash is just one of the forms of money known as paper money. Bank deposits and mobile wallets are also money as long as they are used as a medium of exchange in the market. For a commodity to perform as money it has to have the following characteristics:

1) Acceptability

Money must be acceptable to everyone for it to be used as a medium of exchange Durability-should be able to last for a long time without getting torn,defaced or losing its shape and texture. The material used to make money should therefore be of a quality that resists wear and tear. Divisibility-should be easily divisible into smaller denominations but still maintain its value. This enables the buyer to purchase various quantities of goods and services.

2) Cognizability

Another characteristic of money is that it should be made of a special material that is easily recognizable to minimize risk of forgery and printing of fake notes and mint coins. This cognizability of money enables people to differentiate various denominations of the currency.

3) Homogeneity

Furthermore, money should be made using a similar material so that it appears identical e.g. 500 notes should be printed using the same material and have identical security features to eliminate risk of confusion and forgeries. All notes of the same denomination should be identical.

4) Portability

One of the common characteristics of money is that it should be convenient to carry even if it has a high face value. A thousand Kenya Shillings note, a U.S. dollar note, etc. it should neither be too bulky to carry around as this would hamper trade, i.e. money should be light.

5) Stability in Value

Money is also characterized by durability and stability in value. It should last for a long time without changing in value so that it maintains credibility and acceptability. Money that fluctuates in value makes people want to hold their wealth in form of goods.

6) Liquidity

Another characteristic of money is that it should be easy to convert into other forms of should be able to quickly convert money into properties or other forms of assets.

7) Scarcity: Money should be relatively scarce in supply. If money was abundant in supply then it would lose value.

8) Malleability: the material used to make currency coins should be easy to cast into required shapes.

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