The short answer is that government tells us. In Australia, there are many laws about our money. One important law in this country states that Australian money must be accepted as a method of payment. These laws make sure that a one dollar coin is worth one dollar. But this isn’t the only way that money can be valued.
The first Australian 50 cent coins were made from 80% silver. However, silver prices increased rapidly, and a year after the coins were first released the metal in a coin was worth more than 50 cents. People would change notes to 50 cent coins, melt the coins, and sell the silver! To stop this, the mint started making 50 cent coins from cheaper metals.
Currently all ‘silver’ coins in Australia are made from a much less expensive mixture of copper and nickel. If a fifty cent piece was made of 80% silver today it would be worth about $10!
Material value isn’t the only way a coin can be worth more than its face value. Coin collectors also value coins based on their rarity, desirability or condition. The most famous rare Australian coin is the 1930 penny. One of these coins was sold in 1998 for $225 000!
Article source: http://www.csiro.au/