On Feb. 3, 1690, the Massachusetts Bay Colony was said to have issued the first paper money in the United States. The purpose was to help fund military action against Canada during King William's War. Massachusetts was indeed a truly pioneering colony when it came to money, as they were also the first to mint their own silver coins in 1652.
Key Takeaways
- Before money was invented, goods and services were exchanged through bartering or using commodities like salt, cattle, or grains.
- People used metal objects as money to exchange goods and services as early as 5000 B.C.
- Paper money in the United States dates back to 1690 and represented bills of credit or IOUs.
- New currencies were introduced in the U.S. in 1861 to help finance the Civil War.
- In 1996, a series of bills were introduced that used new methods to prevent counterfeiting.
The History of Paper Money
Money is anything that is commonly accepted by a group of people in exchange for goods or services. Most countries have unique exchange systems of coins and paper money. Some currencies, like the euro, can be used across entire regions.
Prior to the invention of money, goods and services were typically exchanged through bartering. For example, one person might trade eight bags of rice for a goat. Basic commodities—such as salt, tea, seeds, tobacco, and livestock—have been used as money to exchange goods and services as well.
Metal objects represented money as early as 5000 B.C. Lydians started using coins in the 7th century B.C. The earliest forms of paper money were developed in China during the Tang Dynasty (618 - 907 A.D.). In the United States, the first paper money created (in 1690) was called a bill of credit and represented the colony's obligation to the soldiers. Soldiers could spend or trade the colony's IOU just like silver and gold coins.
During the revolution of 1775, colonial leaders tried to replicate Massachusetts' paper experiment on a wider scale, but the newly-christened continentals could not be readily exchanged for silver or gold. Instead, Congress enacted complicated rules for future redemption, assigning each state a quota of continental dollars that could be returned to the government at a future date. On a small scale, it might have worked, but so much money was printed that rapid inflation stripped them of all their value.
Less than 100 years later, in 1861, two competing currencies were used to finance the opposing sides of the Civil War. Their values fluctuated with the fortunes of the war. Yet, it wasn't until the National Banks Act after the civil war that the U.S. government introduced a monetary system where banks could issue paper notes based on their holding of government bonds. These disparate currencies were taxed out of existence in the following decades and replaced with national bank notes, giving the U.S. its first uniform paper currency.
The Federal Reserve Act of 1913 created a national banking system that could keep up with the changing financial needs of the country. The Federal Reserve Board then issued the first federal note in the form of a ten-dollar bill in 1914. The Federal Reserve later decided to reduce the actual size of the notes by 30%. Designs on the notes would not change again until 1996, when a series of improvements were made to make the U.S. dollar more counterfeit-proof.
Correction–Dec. 12, 2021. A previous version of this article incorrectly stated that continental currency was not backed by gold or silver.
FAQs
Paper money in the United States dates back to 1690 and represented bills of credit or IOUs. New currencies were introduced in the U.S. in 1861 to help finance the Civil War. In 1996, a series of bills were introduced that used new methods to prevent counterfeiting.
When was the first U.S. dollar printed? ›
The design, featuring George Washington on the face and the Great Seal on the back, has not changed. The first $1 notes (called United States Notes or "Legal Tenders") were issued by the federal government in 1862 and featured a portrait of Secretary of the Treasury Salmon P.
Why did America switch to paper money? ›
The Continental Congress, the union of former colonies in rebellion against the British monarchy, introduced the first American national paper money in 1775, trying to meet military expenditures. Bullion backing for the issues never appeared, however, and this Continental Currency was rapidly devalued.
Was there paper money in 1776? ›
The paper, made at Ivy Mills in Chester County, Pennsylvania, contained blue fibers and mica flakes. Detector bills were printed on blue paper. Denominations include the: $1, $2, $3, $4, $5, $6, $7 and $8.
What did the U.S. use before the dollar? ›
Continental currency. After the American Revolutionary War began in 1775, the Continental Congress began issuing paper money known as Continental currency, or Continentals.
How much is a 2 dollar bill worth? ›
Most $2 bills in circulation are worth exactly that: $2. And even though you don't see a lot of $2 bills in everyday life, they are still being printed. The Treasury Department's Bureau of Engraving and Printing (BEP) planned to print up to 204 million $2 bills in 2022, CNN reported.
Was there ever a $3 bill? ›
During the "free banking" era in the 1800s, banks had the ability to issue their own currency. Some of these banks chose to issue $3 bills. But these weren't federal notes. They were more like IOUs from the bank.
Is the U.S. discontinuing paper money? ›
Paper money
The United States no longer issues bills in larger denominations, such as $500, $1,000, $5,000, and $10,000 bills. But they are still legal tender and may still be in circulation. The U.S. Bureau of Engraving and Printing creates U.S. paper currency.
Why was paper money bad? ›
Dirty Money
Eighty-seven percent were contaminated with bacteria that could cause an infection in anyone with a compromised immune system, such as people with HIV or cancer. Seven percent had bacteria that could cause an infection in perfectly healthy people. Only 6% were completely clean.
Who is on the $2 bill? ›
Who's on a 2 dollar bill? The front of the $2 bill features a portrait of Thomas Jefferson, a founding father and the third U.S. President. The iconic painting "The Signing of the Declaration of Independence" by John Trumbull graces the back.
All U.S. currency is printed at our facility in Washington, D.C. and at our facility in Fort Worth, Texas.
What is the oldest paper money ever found? ›
The Chinese issued the world's first paper money
The note, called a kua, is the equivalent of 100 coins and dates from the Ming Dynasty, A.D. 1368–99.
Who is on the $5000 dollar bill? ›
$5,000 Bill: James Madison
President James Madison's face appears on the $5,000 bill, and always has since the denomination was first printed in 1918. The Fed and Treasury discontinued the $5,000 bill in 1969.
Is the U.S. dollar backed by anything? ›
Today, like the currency of most nations, the dollar is fiat money, unbacked by any physical asset. A holder of a federal reserve note has no right to demand an asset such as gold or silver from the government in exchange for a note.
Who named the U.S. dollar? ›
On this day in 1776, a committee led by Thomas Jefferson recommended to the Continental Congress that the U.S. create a basic unit of currency called the “dollar.” The U.S. dollar derived its name from a Spanish and Austrian coin originally called the “thaler”—named for Joachimsthal, a silver-mining town in Bohemia.
What was the dollar originally called? ›
'Dollar' is an anglicized form of 'thaler' , the name given to coins first minted in 1519 from silver mined locally in Joachimsthal in Bohemia. Today the town of Jáchymov lies within the borders of the Czech Republic. 'Thaler' is a shortened form of 'Joachimsthaler', the original term of the coin.
When was the first U.S. dollar printed 1862? ›
Greenbacks (United States notes) issued March 10, 1862 | U.S. Capitol - Visitor Center.
When was the first U.S. dollar minted? ›
Mint first made the dollar in 1794. It was made of silver and showed a woman who represented liberty on the obverse with an eagle on the reverse. For more than 170 years, different Liberty and eagle designs were used on the dollar. Fun Fact!
Did the US print money in the 1920s? ›
In the '20s, the Fed printed dollars in efforts to help Great Britain reestablish its pound sterling as a premier currency following World War I.
When did the US start printing 2 dollar bills? ›
Authorized under an act by the United States Congress, the first two-dollar bill was issued in March 1862 and the denomination was continuously used until 1966; by that time, the United States Note was the only remaining class of U.S. currency to which the two-dollar bill was assigned.
