Lately there has been talks to cutting the dollar bill from circulation in order to save money on printing costs, and though getting rid of the ‘buck’ seems senseless (how will we leave tips, or get change to feed the meter?!), there could be an upside. Getting rid of the dollar will only leave us with larger bills, which according to one study, will limit our spending because of the “denominational effect.”
Basically, having cash limits our purchasing since there’s a psychological “pain” of watching our money go, and being left with only large bills, people are less likely to break the bill on a purchase. So maybe getting rid of the dollar wouldn’t be so bad after all if it means spending less.
In the study conducted by The Journal of Consumer Research in 2009, the chance of spending diminishes when a sum of money is represented with a single large denomination like a $20 bill instead of the sum of smaller bills like the dollar. People are less likely to break a $20 or $50 bill because of the psychological pain of seeing your money get spent.
But dollar bill or loose change? There’s hardly any attachment and you’re more likely to just throw that money away. The authors of the study claim that keeping higher bills is “a strategic device to control and regulate spending.”
There’s even more behavioral strategies that are proven to work on limiting your spending like setting a price limit of how much you want to spend, shopping with a frugal friend and not procrastinating when it comes to buying a gift.
What do you think of this concept? Do you think getting rid of the dollar bill will help consumers spend less money in the end?
Want more ways to save? Check out all or money-saving tips featured for Tight Strings Tuesdays to get more bang for your buck!