From the outside, collecting coins and paper money may seem similar. It is also true that some collectors who focus on one will likely include a little of the other in their collection. The study of either usually involves learning quite a bit about art, history, economics, technology and politics. While collecting paper money and coins are both very interesting pursuits that share some common traits — as coins and paper money are both currency — they are actually quite different numismatic niches. One might compare paper money collectors to people who appreciate art but prefer printed media to sculpture.
Paper money isn't specifically valuable just because it is old. The value of paper currency usually depends on a particular denomination's scarcity, condition and market demand. Older bills are simply likely to be scarcer, especially in high condition, than newer bills. While some collectors concentrate on the artistic merit of a certain bill, others are fascinated by the technology used to print money. To reduce the risk of counterfeiting money, the technology used to print official bills has become very sophisticated. Of course, there are cases of known counterfeits that have become quite valuable just because of the counterfeiters’ skill or the history surrounding the crime.
As currency, paper money doesn't have as long of a history as coins do. Still, the Chinese are believed to have printed the first paper money around the seventh century. No examples of these bills exist, but a Ming Dynasty paper note from the 14th century does. Not surprisingly, a Swedish bank issued the first true paper bank note in Europe in the 17th century. However, the Massachusetts Bay Colony issued the first New World paper money a few years later. The study of U.S. paper money spans from that first Colonial note to the crisp bills that have just arrived at the bank. During that span, there have been many different kinds of U.S. currency, and many collectors focus on specific kinds.
Serious currency collecting didn't start until the beginning of the 20th century. Today, it is considered one of the areas of numismatics (the study of money) that is growing most rapidly. At the same time, people in many parts of the world don't carry as much currency as they used to. Perhaps collectors have grown more excited about collecting paper money as it begins to disappear in favor of electronic banking and debit cards. As paper money seems to fade as currency, the hobby of collecting it has become even more popular and exciting.