Trying to save money? Carry only crisp new bills
People tend to spend worn bills faster to get rid of them but are more likely to hold on to crisp new currency, according to a new study.
But when they think they're being watched, pride kicks in and they pull out crisp bills to show off.
"The physical appearance of money can alter spending behavior. Consumers tend to infer that worn bills are used and contaminated, whereas crisp bills give them a sense of pride in owning bills that can be spent around others," write authors Fabrizio Di Muro (University of Winnipeg) and Theodore J. Noseworthy (University of Guelph).
In several studies, consumers were given either crisp or worn bills, and asked to complete a series of tasks related to shopping. Consumers tended to spend more with worn bills than with crisp bills. They were also more likely to break a worn larger bill than pay the exact amount in crisp lower denominations.
However, when consumers thought they were being socially monitored, they tended to spend crisp bills more than worn bills. When testing the well-known finding that people spend more when given the equivalent amount in lower denominations (four 5 dollar bills) than when holding a large single denomination (a 20 dollar bill), the authors found that the physical appearance of money can enhance, attenuate, or even reverse this effect.
"Money may be as much a vehicle for social utility as it is for economic utility. We tend to regard currency as a means to consumption and not as a product itself, but money is actually subject to the same inferences and biases as the products it can buy," the authors conclude.
The study has been published in the Journal of Consumer Research.