This experiment involves magnets, be aware of the danger of children swallowing them. Adult supervision is required.
Try holding the magnet over the $1 bill and see which part is pulls up.
The Federal Reserve prints money they use a iron oxide which is magnetized when another magnet is present.
Vending machines use scanning technology called Magnetic Ink Character Recognition (MICR). This technology is use to find the magnetic pattern on it and to determine its denomination. Counterfeit detectors use similar technology to detect fake bills.