Pennies: A Valuable Commodity or a Pain?

Saturday July 4, 2009

Most currencies throughout the world have low denomination coins. These can be cents, centavos, pennies or some other small denomination.  In the English language these are often called ‘pennies’ and although pennies as a term is still used in the United Kingdom, the 1-cent piece in the US is also known as a penny.

Pennies are often derided for being of so little worth.  A penny, who needs a penny?  What difference can it make?  Why do we bother with pennies?  These are the questions most often heard, when people even think about the penny and few people do that these days. 

Indeed some people who don’t like pennies even complain that they are bothersome and point out that it costs some countries more money to produce a penny, or its equivalent, than it is actually worth.  So it could take 2 cents to make a 1 cent piece.  Where is the logic in that?  Why don’t we just get rid of them and each currency can then start to have coins that reflect the fact that prices have got a lot higher since pennies were introduced?

There is even an organisation, in the US, that is ruthlessly entitled the ‘Citizens to Retire the Penny’, who believe that the penny has indeed become just too old fashioned, no longer a slim young thing, but rather just a tired old coin that really should be put out of its miserable existence, by being retired and thereby becoming of interest only to collectors.  They strongly advocate that it is taken out of circulation with almost immediate effect such is their antipathy to the penny.

And it has to be said, that those championing the case in favour of the penny, seem strangely quiet.  They are just not making a move to tell us why we should keep it.  Perhaps these people don’t even exist.  Yet is there something in people’s psyche that simply loves the penny or the little 1 centavos piece?  Are we, whatever country we live in, kind of hooked on our pennies?

Well to some extent that would seem to be true, since a survey done in 2006 found that a massive 79% of the population in the United States would indeed pick up a penny and interestingly, a whopping 84% of women will stoop to pick up a penny.

Yet the penny is left to languish all over the place.  In the US alone, it is estimated that almost $10 billion, that’s right billion, not million, worth of loose change is either on a little money tray by your bed, down the back of the sofa or in a jar, waiting to be taken to the bank.  Except nobody takes it to the bank and the result is that money which could be in circulation is left doing nothing: and this happens in almost every country in the world, except where people are very poor.

Hoarding our pennies

So is saving our loose change a bad thing?  Should there be an international campaign to get all the loose change in the world back into circulation?  Should wives be carrying out raids on their husband’s pockets and putting all the change that they have found, right back into the economy?  Indeed, could the world solve the credit crunch by just getting every little 1 cent or penny piece back into circulation.  After all they have been sitting around for a while and now they need to start doing some work, start to earn their keep again as it were.

Or, conversely, is it a good thing to start hoarding pennies?  After all if you save 10 cents a day then that works out at $36.50 per year.  Multiply that by 5 (say by saving 50 cents a day) and you get $182.50 every year.

Now most people will react to that news in one of two ways, depending on if you are a hoarder or you are an anti-penny person.  The hoarder will jump for glee at this news.  My, just 50 cents a day and you end up with almost $200.  Wow, imagine that.

The anti-penny person will simply think that going to the time and trouble of saving 50 cents every day, putting them somewhere safe, then counting them out and taking them to the bank, paying them into your account, just really is so not worth it.  For less than $200, no thanks.

Yet there are other factors at play here and one of them surprisingly, depends on your age and other characteristics.

The Penny’s Age Relationship

Currently there is a definite correlation between age and how people view the penny.

Older people seem to like the penny.  They regard it as quite a useful little coin and they can still remember (if they are old enough) exactly what they could buy for a penny and how they were always encouraged to save their pennies because, after all, if you look after the pennies then the pounds will look after themselves and other such sayings from grandma.

Middle-aged people are slightly more ambivalent about the penny.  They can’t quite remember being able to buy anything with it and so they think it’s ok, but it can be a hassle always getting a penny in change, because everything costs 99¢.  So sometimes if they are going to get a 1¢ coin in change, they will either not accept it, or they will simply put it in a charity box.  Most middle-aged people will however, usually accept a penny.  Then they forget about it.

But younger people, well it may not be right to generalise about young people as a whole, but it is possible to give some broad guidelines.  Young people, particularly in the US and the UK and indeed in many other countries in Europe, don’t like the penny. 

They regard it as worthless and something that just isn’t worth the time and trouble to care about.  In some cultures, young people actively demonstrate their affluence by throwing away their pennies.  They come out of a shop and drop the penny on the ground.  The young people who then save their pennies or make sure that they hang onto them are labelled as being mean or worse and they can even be picked on for keeping their pennies. 

Partly these different attitudes to the penny are born out of differences in attitude.  The older you are, the more likely you are to have experienced some lean times in your life.  These are the times, perhaps when you were starting out in life on your own, or had recently got married and were starting a family.  These were times when you were worried about money, when the rent was due, the bills had come in and suddenly money was tight.  If you have been through those kinds of times, then you are more likely to feel that every penny can make a difference and that pennies should be taken care of.

If, however, you are young and from a relatively privileged background and you have never had to worry about bills, paying the rent or just getting by, then you are less likely to see any value in a penny.

People under the age of 21 will be used to things costing at least $1 or 1 euro or £1.  They will not be used to thinking about 1¢ and so it will simply seem like a bothersome little coin that really isn’t worth cramming into your pocket.  It just takes up room, so why not drop it to the floor?

Social standing also comes into play.  If you are a sleek city slicker, calling into your local mall on the way home from signing a multi-million dollar deal, then do you really want to be seen accepting a penny in change?  Isn’t it worth just refusing it?  How poverty-stricken could you look if you accept that humble old penny?  So, the only way to save face and avoid embarrassment is to avoid taking it in the first place, then people really will know just how well off you really are.

People who may not be in same league, may wish to seem as if they are and they too will refuse a penny on the grounds that they don’t want to look like they need to accept a penny.  And so the poor old penny is simply shunned by the rich and would be wealthy people who regard it as being simply beneath them.

Should Pennies be abandoned

So, if younger people see little need for the penny, has it indeed had its day?  Well, it does serve a useful purpose. 

There is no better way of demonstrating just how useful the penny is by looking at the 1999 ‘crisis’ ok inconvenience, which gripped the US when there was a shortage of pennies. 

The US economy may not have ground to a halt as a result of this crisis, but it was inconvenienced.  Stores and businesses all across the US simply did not have enough pennies and the penny was in short supply.  Suddenly people who had ignored the penny were starting to see that it did indeed have some use.  Mainly it acts as a way of pricing things down.  If people see something priced at 99¢ they are more likely to buy it than if it says $1.  There is something psychological about getting change from a $1, no matter how little that 1¢ is actually worth.  If everything were priced in dollars, or to the nearest 5¢, then we may be much more reluctant to buy things and when the penny was in short supply in the US, people realised this.

Although people did not probably need the 1¢ change they were due, they still wanted it and they still wanted to put that penny in their pocket and they missed it when they couldn’t have it.

The government announced that it knew people were hoarding the pennies, because the economy was quite strong at this point and whenever the economy is strong people tend to have more disposable income.  At this point they put their pennies into savings jars, because they don’t need them on a day-to- day basis.  Eventually this can lead to their becoming less available and the Mint may not be able to keep up with demand, as was the case in the US.

The situation got so bad that some banks were even offering customers an extra 10% for every dollar of pennies they could take to the bank. 

And yet there are a lot of pennies that could be had, were we to be able to find them all.  In the US alone, 312 billion pennies were produced in 30 years.  So really there should be enough of them around to prevent some kind of national shortage!  They must be somewhere, it is just that no one knows exactly where and it has to be said, not everyone actually cares.

The Euro and Pennies

Interestingly the euro, which is a relatively new currency, which only started circulation in 2002, was also equipped with pennies.  So the penny can’t be all that bad, if it were deemed worthy enough to be included in a new currency, under the guise of being a 1 ¢ piece.  Yet it is already falling from favour. 

Already 2 out of the 15 countries that use the euro have actually dropped the 1 and 2 cent coins from their ranges, with only 5 cent pieces being used as the lowest coin denomination available. 

Yet if you are buying three or four items of a different price, it is possible that they will add up to a figure that ends in 3 cents or so.  This will simply be rounded up to the nearest 5 cents.

So the poor old penny only lasted for two years in Finland and the Netherlands.  It was soon dispatched and other countries may well follow suit, which would result in the euro penny being one of the most short-lived in history.  But since it is such a new currency anyway, no one really seemed to be too bothered.  There were no emotional memories associated with this penny!

Electronic Money

Globally our attitudes to money are changing and increasingly, money itself is being taken out of circulation, as people depend on electronic payment systems and credit or debit cards. 

There are even some cards where you can charge them up with say $50 and then you use this card to pay for all your little items, like some milk or dog food, so you don’t even need to carry any cash around with you.

As people become increasingly concerned about money and theft, it is likely that these type of systems will become ever more popular, thereby perhaps seriously undermining the status of cash within the world as a whole.  Where once, cash was king so to speak, most developed countries have forged ahead with electronic systems and internet banking. 

Already in many developed countries you could live without cash, relying instead on money being electronic.  Indeed in Japan you can even use your mobile phone as a credit card, so you don’t even have to carry a separate card.  Hong Kong has its Octopus card that you can use not just to pay for public transport, but also to pay for smaller items that you want, but would not use a credit card for.  In short, they are a replacement for small amounts of cash.  Similar card schemes, some of which can only be used to pay for public transport, have been introduced throughout the world and so they are likely, within 10 or 15 years to be very much the norm.

The penny’s condition may be terminal

The advent of these types of payment will result in countries all over the world becoming less cash reliant and more reliant on electronic means of payment.  The logical conclusion of this is to revamp the currency, so that it is more streamlined and it is probably at this stage that pennies will be dropped off and then no longer issued. 

This may not suit everyone and undoubtedly as each currency starts to shrug off its pennies and send them to a rest home, there will be shouts of disapproval from the penny loving brigades.

Indeed in 2007, a senator indicated that he thought that the penny was obsolete and should be abandoned, but then he stated that politically this would not be a good move, since people who were fond of the penny would not wish to see it go.

So, we do seem to be stuck with the penny, but only for a few more years.  You probably either love it or hate it, or just couldn’t care less about the penny.  But the next time you get one in your change at least give it a glance and then either save it, use it again or give it to charity. Don’t just leave them all over the home!