How does money work in the world of Harry Potter?
J.K. Rowling purposely wrote a rule in her books that only the Philosopher's Stone can create gold. (In the U.S. version, the name was changed to 'Sorcerer's Stone'). Straight away, we know that even for wizards, money doesn't grow on trees.
The metal coins used by wizards are bronze Knuts, silver Sickles, and gold Galleons. There are no paper dollars here — everything in the wizarding world is made from precious metals. In the books, we are told that one Galleon is equal to 493 Knuts, or 17 Sickles.
Could you afford to live in the wizarding world? According to the Harry Potter Wiki, one Galleon is equivalent to roughly 5 British pounds, or $6 U.S. When Harry gets all of his fancy brooms to fly on, we can only speculate that they cost nearly as much as a car.
A butterbeer is roughly $3, which seems pretty reasonable.
You can't always get what you want
It seems as though wizards can use magic to cover all of their basic needs. In the films, food appears out of thin air. Gamp's Law of Elemental Transfiguration tells us that it doesn't actually come out of nowhere. If a wizard can afford to buy one apple, they can multiply it into more. The rules of the wizarding world are flexible enough to be sure that no wizard should ever go hungry.
In Fantastic Beasts and Where to Find Them, we see that spells can restore buildings that have been demolished by magical creatures, so long as all of the original materials are still in the area. This means most wizards should have no reason to ever be without a roof over their heads.
Plus, education is free. Students buy their robes, books, and wands in Diagon Alley, but there is never any mention of a tuition cost to attend Hogwarts. This ensures an equal opportunity for everyone, regardless of where they came from.
However, even though wizards are well taken care of, magic has its rules and limitations. Power that is unavailable to everyone is its own form of currency. Basically, any type of magic item or potion that allows a wizard to bend the rules is extremely valuable, and can be traded like a form of currency.
A wizard's income
Most adult wizards have jobs, and deposit their earnings in Gringotts Bank. As we've seen in Fantastic Beasts and Where to Find Them, wizards have careers in various countries both in and outside of the Ministries of Magic. However, we are never given the exact salaries of any particular wizarding job.
The Weasley Family is always shown as being poor, and it is a major plot point in both the books and the movies. With their hand-me-down robes, their cozy-but-messy house, and their hand knit sweaters at Christmas time, the audiences knows that Ron's large family is struggling to pay for luxuries that his classmates at Hogwarts get to enjoy.
If the Weasleys are a picture of wizard poverty, then being poor in the magical realm is actually not so bad, compared to what poverty looks like in many places across the Muggle world. There is no need for them to collect food stamps or cram into a one-bedroom apartment. The most valuable asset anyone can have is love, and the Weasleys have plenty of it.
J.K. Rowling learned this philosophy from personal experience. Before making it rich from writing the Harry Potter books, she was a single mom. The struggles of the poor hold a close place in her heart. She could live anywhere in the world, but chooses to continue to live and pay taxes to the United Kingdom, because she seriously appreciates the help she received. "There are places in the world where I would have starved."
Small business and entrepreneurship
As the old saying goes, "small business is the backbone of the economy". You won't see any Wizard Walmart appearing in J.K. Rowling's stories. The wizarding world seems to have skipped the Industrial Revolution altogether, and kept the tradition of specialty hand-crafted items from small mom-and-pop shops in Diagon Alley.
The wonderful thing about an economy that supports small businesses is that it gives poor people the opportunity to use their unique talents and skills to make more money. We see this happen when Fred and George graduate Hogwarts and open Weasley's Wizard Wheezes. They created joke products like expandable ears, potions, and even fun and fascinating Muggle magic tricks. Like many start-ups, they had humble beginnings, with a mail-order catalog.
After winning 1,000 Galleons at the Triwizard Tournament, Harry chose to lend the money to Fred and George, and they used it to open up the brick and mortar store on Diagon Alley. Just like the real world, it isn't exactly cheap or easy to open a business, but a great idea with an in-demand product targeted at kids under 11 years old who haven't gotten their first wands yet, all the way up to adults looking to buy a love potion.
The rich get richer
Just like the real world, wizards who are willing to step on people who are weaker and less fortunate than they are can usually make huge financial gains. However, Rowling draws a line in the sand over a huge divide between "good" and "evil." Sometimes, people can get lucky, and they can rise out of poverty, like Harry did. However, it usually doesn't happen unless they are a good person.
One Slytherin family that has never been exactly moral are the Malfoys. Forbes Magazine ranked Lucius Malfoy at No. 14 in the rankings of the most wealthy fictional characters in existence. He has an estimated net worth of $1.6 billion.
Rowling heavily hints that while the Malfoy family has never been caught, there are rumors that they have been involved in gathering Muggle items of wealth, like gold, diamonds, artwork, etc. The Malfoys are independently wealthy, which means that they never have to work.
The overall message that Rowling gives to her audience is that money is not the most important thing in the world. Love, friendship, and loyalty are the most valuable forms of currency, and money means nothing, if you have no one to share it with.