What Is a Buck? Definition, Meaning, History, and Value

What Is a Buck?

Buck is an informal reference to $1 that may trace its origins to the American colonial period when deerskins (buckskins) were traded for goods. The buck also refers to the U.S. dollar as a currency used both domestically and internationally.

Understanding Bucks

The earliest use of the word "buck" is from 1748. Conrad Weiser, a Pennsylvania Dutch pioneer, wrote in his journal that someone was robbed of 300 bucks’ worth of items. He clarified five bucks were worth a cask of whiskey at the time. Once American currency replaced animal skins as a way to pay for goods, the term "buck" remained as slang for one dollar.

Expressions Using "Buck"

Several idioms and expressions use the word "buck." When someone wants to "make a fast buck," it means they want to make money quickly and easily. Making an honest buck refers to earning money honestly and legally.

A person who gets "more bang for the buck" gets better value for their money. For example, a computer priced at $200 gets more bang for the buck compared to a similar computer priced at $300. Conversely, buying a 15-year-old vehicle may not provide much bang for the buck if it breaks down shortly after purchase.

On foreign exchange trading desks, a buck commonly refers to a $1 million trade. A half-a-buck represents a $500,000 notional amount.

The Value of a Buck

The buck also refers to the U.S. dollar exchange rate versus other currencies. If the buck is trading at $1.15 versus the euro, it means U.S. consumers need to spend $1.15 to buy one euro’s worth of goods. A strengthening dollar means U.S. consumers get more value for their buck, while a weakening dollar means the euro is worth more compared to the dollar.

When planning a trip to Europe, a stronger buck is favorable as it means the euro exchange rate is cheaper or lower in value (i.e., $1.05). However, when returning to the U.S. from Europe and exchanging euros for dollars, a weaker buck and a stronger euro is preferred (i.e., $1.25).

Breaking the Buck

"Breaking the buck" refers to money market funds falling below one dollar in net asset value (NAV). It happens when the fund’s investments fail to cover operating expenses or investment losses.

Key Takeaways

• Buck is an informal reference to $1.
• "Making a fast buck" means making money quickly.
• The buck also refers to the U.S. dollar exchange rate.
• On foreign exchange trading desks, a buck refers to a $1 million trade.

Real-World Example of the Buck

Money market funds tend to "break the buck" during times of low interest rates or high risk when investors sell their funds for higher-yielding or safer investments. The first occurrence in the United States was in 1994 when the Community Bankers U.S. Government Money Market Fund was liquidated at 94 cents due to large losses.

At that time, the fund was invested in the safest short-term securities available. The unprecedented loss shocked the investment world as money market funds were considered extremely safe investments.