‘Look after the pennies, and the pounds will take care of themselves’ my grandmother used to say. But perhaps you’ve heard the old story that if Bill Gates sees $100 on the ground, it will cost him more to bend down and pick it up than to keep on walking?
It’s the same kind of logic used to justify domestic services:
‘I earn $30 an hour. Why should I clean my own house when I can pay someone else $15 to do it?’
On the surface, this seems to make (financial) sense – You earn $30, give half to the cleaner or the lawn mower, and still come out with a profit.
But this kind of maths really only works if you were going to take several hours’ unpaid leave to clean the house or mow the lawn – which let’s face it, no one ever does. Most people get up earlier, stay up later, or forego some relaxtion/socialisation/entertainment on the weekends – that is, they sacrifice time they would not have been earning money anyway – in order to get their lives in order.
If you pay someone to do these household tasks, you’re not smartly allocating your money, you are simply buying more leisure time.
Likewise, Bill Gates won’t lose money by bending down to pick up $100. His vast wealth comes from income and investments that keep ticking over regardless of what he does. His passive income brings in money whether he is in a meeting, brushing his teeth, or picking up $100 notes.
The value of change
I remember when I was at high school, some students would exit the school canteen and throw the change they had received (silver coins) on the ground. Anyone who picked them up would be called a ‘scab’. These kids felt it was ‘uncool’ to carry anything other than notes. Coins were beneath them. And I suppose that, since it was their parents’ money, they could afford to be blasé about this unearned cash. (And no, I didn’t go to an exclusive, expensive private school. These were rural, public school kids).
But it’s not just kids who seem to devalue coins.
Many people find them irritating at best, or useless at worst.
‘Whenever I get change for a dollar, I will ask the cashier to keep the pennies. They aren’t worth my time, or hers, or yours’ says Stephen Dubner in When to Rob a Bank. ‘If I were the type of person who regularly a) loaded up my pocket every day with loose change or b) brought all my loose change to a bank or supermarket coin machine, then it might be worthwhile to keep the pennies. But I’m not, and so it’s not’.
In fact, Dubner goes so far as to wish pennies were abolished. But why?
The main reason is that it costs the US government more than 1c to make each 1c coin. Every time a penny is minted, money is actually ‘lost’.
So why do pennies still exist?
Mark Weller, the voice of ‘Americans for Common Cents’ (see what they did there?!) appearing on the US program 60 Minutes, claimed that rounding up will cost Americans $600 million a year. (Of course, there is the option of rounding down too… not to mention the tax savings to be had from not minting coins at more than face value…) As it turns out, Weller freely admits he has a financial interest: he’s a lobbyist for the company that makes the blank discs the mint turns into pennies.
Dubner goes on to describe a Virgin Mobile ad promoting text messages so cheap, they made even a penny worthwhile picking up.
‘66% of our population wants to keep the penny and 79% would stop to pick one up off the ground’ says the ad (its source? The 8th Annual Coinstar National Currency Poll – Coinstar, as Dubner points out, is a company that places coin machines in supermarkets, into which customers can dump jars full of change and receive notes or ‘bills’. And they charge a whopping 8.9% commission for providing this service.)
Alternative uses for pennies
Still, we see some amazing uses for pennies. You can tile your floor with pennies for $2.50 per square foot, which, as Dubner states, is cheaper than glass ($25), marble ($12) or porcelain ($4) tiles.
For a while, in my more wasteful days, ‘mangled pennies’ were my collectable souvenir of choice. They were inexpensive, didn’t take up space in my apartment on return, delightfully kitsch, and – I’ll admit it – the currency defacing aspect gave me a rush.
I mangled my first penny in Hawaii – where I believe it cost me about $1 for the privilege. Soon, I added pennies mangled in England and Australia and Japan to my collection. (Outside the US, where defacing currency is a crime and the coins are often made of considerably harder material, it was usually penny-shaped discs being mangled, which I must say was nowhere near as satisfying.)
After I’d filled around a page of the mangled penny album I bought at Tokyo Disneyland, I realised what the US government doesn’t seem to have – namely, that I was spending a lot of money producing a coin of next to no value. So I stopped.
So does all this mean that coins are worthless?
That we shouldn’t stoop – literally and figuratively – so low as to pick them up?
Over the course of our mortgage, we found around $200 on the ground, under couches, between seats, in busses and trains etc. And in turn, that $200 saved us around $600 in interest over the life of our loan.
As I wrote in the ‘about me’ section, people would sometimes chuckle to see me picking up loose change. But in most cases, if I didn’t it would just be swept up by a street sweeper or go down the drain (gutters near bus stops are a great place to look for lose change, as everyone scrambles to get money out of their wallet to buy tickets). And not only was I saving the government from uselessly minting new coins by keeping them in circulation, but we made a not insubstantial dent in our mortgage too. The trick is to immediately put the found coin in your wallet, and then transfer the equivalent to your mortgage (or savings account).
What if your bank won’t let you transfer sums under $1? You can get around this by transferring, say, $1.05 and then transferring $1 back. But it’s even better if you keep the dollar working for you. Consider it a co-contribution.
What is the lowest denomination coin you’d consider picking up? Throwing away? Transferring to your mortgage or savings account?
Keep your eyes on the ground today (except when crossing the road!) and see what you can pick up and save!
Today’s featured image is a selection of coins from our world travels!