Future Wealth Builders
Money in Motion: The Velocity of Money
Hello and welcome to today’s episode.
Last week we discussed Central Banking. You can find it by clicking the link below.
Today, we are talking money in motion.
Before he departed he summoned his ten servants together and charged them, ‘I am entrusting each of you with fifty thousand dollars to invest while I am away. Trade with it and put the money to work until I return.’
https://bible.com/bible/1849/luk.19.13.TPT
Money doesn’t just sit still—it moves! The velocity of money is all about how fast money changes hands in an economy. Think of it like a soccer game: the more players pass the ball and take shots, the more exciting the game becomes. If money moves quickly, people are spending more, businesses are making profits, and the economy is active. But if money slows down—like a game where no one is passing the ball—it means people are saving more or spending less, and businesses may struggle.
Imagine you buy a chicken or fish burger from your favorite fast-food joint. The restaurant uses your money to pay its employees, buy more ingredients, and cover other costs. The supplier who sells the burger ingredients then spends their earnings on groceries, rent, or even a new pair of sneakers. The store that sells the sneakers uses that money to pay its workers, who then spend it on something else. That single bill or money you spent buying the burger keeps moving, helping many people earn and spend. This cycle is what keeps the economy alive!
Governments and central banks keep a close eye on the velocity of money because it helps them understand how the economy is doing. If money is moving too fast, prices might rise too quickly meaning things get more expensive. If money is moving too slowly, businesses may not make enough sales, and the economy might struggle. To fix this, central banks might change interest rates or take steps to encourage people to spend or save money.
Money moves, it never stays,
Changing hands in countless ways.
Buy a snack, the store gets paid,
Then they order more, the cycle’s made.
So, why should you care about this? You should because your own spending and saving habits play a role in how money moves in the economy! Learning about money and how it works can help you make smarter financial decisions. Whether it’s earning, saving, or spending, understanding the velocity of money can help you see the bigger picture and prepare for a financially successful future. So, next time you buy something, think about how that money will continue to move and impact many lives!
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