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Grade K-2

Funny Money or Phony Money?

Updated: December 16 2015,

Money is what we use to show what goods or services are worth. When you do work, you are paid with money. When you sell something, the buyer gives you money. Sometimes it’s a lot of money and sometimes it’s just a little money. How much money you are given depends on how much what you are selling is worth. Some people try to make fake money. Making fake money is a crime called counterfeiting. Only one place in America makes money; it is called the United States Bureau of Engraving and Printing.


introMoney is what we use to show what goods or services are worth in terms of other goods and services. When you do work, you are paid with money; when you buy something, you give the seller money. When you sell something, the buyer gives you money. Sometimes it’s a lot of money and sometimes it’s just a little money. The amount of money you are given depends on the worth of what you are selling. People use the money they earn to exchange for goods and services. People want money because they can use it as a medium of exchange and a store of value. Only one place in America legally makes money; that place is called the Bureau of Engraving and Printing (BEP).

Learning Objectives

  • Explain the importance of a standard monetary system.
  • Differentiate between authentic currency and counterfeit money.

Resource List

(NOTE: Some of the sites are text-heavy; you may want to use them as supplementary, not primary, sources of information.)


Before the students get started on this activity, they should understand why counterfeit money is damaging to our economy. In a large group discussion, ask them the following:

  • Have you ever bought something?
  • If so, what was it?
  • How much did it cost?
  • Where did the money for this purchase come from?
  • Did you have to do any work to earn that money?
  • Did you have to save your money to pay for the item you bought?
  • If you spent $3 on a new book, and had to walk your dog 10 times to save that much money, how would it feel if some other people didn't have to do any work for their money and just made it themselves?
  • What would happen if people thought your money didn't have any value?

Activity 1

[NOTE: In the course of this lesson, allow the students to handle and examine both coins and bills; doing so will greatly enhance the tactile learner’s experience.]

[NOTE: Before you conduct the following demonstration, take a moment and explain to your students the value of money. Also explain that the dollars used in this activity may be used to purchase any number of the books, depending on how much your students are willing to pay per book.]

  • five booksPlace five similar books (or other objects) on a table
  • Then, put five one-dollar bills on the table. Tell the students to pretend that you are going to buy these books with your five one-dollar bills and you will not get any change in return. How much did each book cost? [One dollar each.]
  • Then put five more one-dollar bills on the table so that there is a total of 10 dollars. Ask the students how much each book would cost now. [Two dollars each.]
  • Explain that where there is more money “circulating,” prices go up.* If a whole bunch of people were spending pretend money, would that make your book cost more or less? [More.] Why?

Activity 2

Students will work individually or in pairs on the Interactive Phony Bologna activity. They will look at images of money, determine whether it is real or “phony bologna,” and then click and drag it to the appropriate wallet. When they are done, they will be able to print out a list of the choices they made; the list will assist with assessment of their understanding. Have the students compare the currencies shown in the two columns of the printed interactive activity, noting similarities and differences.

[NOTE: Your students will notice that the currency represented in the Phony Bologna activity does not look exactly like real currency. We have inserted a watermark stating Not Legal Tender. This would be a good opportunity to discuss with your students that since counterfeit currency is illegal, it can be considered illegal to represent real currency in the interactive activity.]

For a good supplementary resource to be used prior to the activity, go to the US Treasury Counterfeit Money Explanation Website. This site explains the features that real currency has so you can recognize counterfeit money.


Have the students discuss the following questions:

  • What would happen if everyone used counterfeit money?
  • If everyone could buy whatever they wanted whenever they wanted, what would happen to prices?

Extension Activity

The Changing Face of Money
In "The Changing Face of Money," the students play a game in which they guess which objects have been used as money throughout history. In the process, they learn several basic economic concepts. They also learn that money must be a store of value; it must keep its value over time. Finally, the students will compare modern U.S. money with older versions of U.S. money using web sites and real coins; they use this new knowledge to design the money of the future.

Money Central Station
This interactive kid-centered section of the Bureau of Engraving and Printing web site provides students with opportunities to explore the differences between real and counterfeit money.

Know Your Money
This mini-site produced by both the U.S. Treasury Department and the U.S. Secret Service provides valuable information about counterfeit money.


Teachers can evaluate the children’s understanding by having them print out their lists of real money and phony bologna money.

Have the students answer the following questions:

  • What is counterfeit money?
  • How is our economy affected by people using counterfeit money?