With the rise of credit cards, PayPal and other ways of transferring cash electronically, real cash-money is in decline. Like CDs and books before it, the folding stuff looks certain to be another victim of technological advances.
But not just yet.
We still love our cash and it turns out that money's physical manifestation has all sorts of interesting psychological effects on us.
For example, people tend to spend more when they have larger denomination notes, even if the amount is the same. In other words they spend more when using one $20 bill than if they have four $5 bills.
We are also emotionally attached to our currency. Americans continue to resist the introduction of a dollar coin, preferring the dollar bill, and British people like their pound over the euro.
So what about the effects of dirty money? I don't mean money that's the result of criminal activities; I mean, literally, money that is soiled.
As bills circulate, they pick up all sorts of muck, including bacteria and traces of illegal drugs. In fact, in the UK 80% of banknotes contain traces of illicit substances, usually cocaine—surprisingly it's not an urban myth. Similar rates have been found in the US and elsewhere around the world.
Naturally dirty bills are periodically replaced. The average $1 bill in the US is in circulation for about 18 months while for the less-used $100 bill it's about nine years.
This means that when you go to the cash machine, sometimes you get a bunch of crisp, new notes and sometimes it's a little wedge of crinkled up scraps that look like they've been around the block more than a few times.
Surely everyone prefers to get the crisp new notes from the machine. But does it make any difference to how we spend it whether money looks new and crisp or old and soiled?
Out with the old
In a new study by Muro and Noseworthy (2012) they found that it does. Across a series of experiments, when people were given old, worn bills they usually spent more than when given crisp new ones.
For example, participants given a crisp $20 bill spent an average of $3.68 but those given the old one spent an average of $8.35.
The same was true when participants were offered a chance to gamble. A new bill proved a way more tempting prize than an old soiled one, with 80% of participants willing to gamble away an old one to get a new one, compared with only 23% willing to gamble a new one to get an old one. It seems crazy because the amount of money on offer was exactly the same.
So it seems we generally prefer to get rid of old notes and keep the new ones. But this isn't always true; sometimes the dirty money stays in our pockets.
All of the transactions in the previous study were made by people on their own. What happens when there are others around?
The researchers found that in public our preferences reverse. When we think other people are watching us, we are more likely to spend the crisp new notes, rather than the old crinkled ones, if we have a choice.
This study demonstrates two interesting things. Firstly, we find soiled bills disgusting and want to get rid of them. Secondly, when other people are watching we prefer to show off our crisp, new bills, despite the fact it means we have to keep the dirty bills instead.
Once again it shows the emotional attachment we have towards inanimate objects that, on the face of it, seem interchangeable. People in this study felt measurably more pride towards their crisp bills than the dirty ones.
It's the same reason some people still love vinyl and the traditional dead-tree-type-book: the physical form that things take has a strong effect on us; it's not just about the information that's contained within.
Image credit: Adrian Clark (Detail from a £20 note)
The Psychology of Money
→ This post is part of a series on the the psychology of money:
- Avoid The Relativity Trap – How Thinking Globally Can Save You Money
- Social Versus Financial Thinking – When Money Makes People Lazy and Selfish
- FREE! But at What Price?
- 6 Quirks of Ownership: How Possessions Bend Our Perceptions
- The 3 Reasons Money Brings Satisfaction But Not Happiness
- Do Big Money Bonuses Really Increase Job Performance?
- Money and Self-Control: The Battle Between Thoughts and Emotions
- Why Money is Part of Human Nature: Money as Both Tool and Drug
- Why We Buy: How to Avoid 10 Costly Cognitive Biases
- 8 Psychological Keys to Spending Wisely
- How Does The Cleanliness of Money Affect Our Spending?
Making Habits, Breaking Habits
In his new book, Jeremy Dean--psychologist and author of PsyBlog--looks at how habits work, why they are so hard to change, and how to break bad old cycles and develop new healthy, creative, happy habits.
→ "Making Habits, Breaking Habits", is available now on Amazon.Reviews
The Bookseller, “Editor’s Pick,” 10/12/12 “Sensible and very readable…By far the most useful of this month’s New You offerings.”
Kirkus Reviews, 1/1/13 “Making changes does take longer than we may expect—no 30-day, 30-pounds-lighter quick fix—but by following the guidelines laid out by Dean, readers have a decent chance at establishing fulfilling, new patterns.”
Publishers Weekly, 12/10/12 “An accessible and informative guide for readers to take control of their lives.”