You're less likely to spend your cash if it's in large denominations, reports the authors of a paper published in the Journal of Consumer Research. Priya Raghubir and Joydeep Srivastava ran a test and discovered that people are more likely to hang on to a $20 bill than they are to a wad of 20 one-dollar bills. Whats more, people already understand this principal on an instinctual level, preferring to "receive money in a large denomination relative to small denominations when there is a need to exert self‐control in spending." The study's findings, say the authors, are in line with a Mexican folk saying: "You should take care of small, loose bills as large bills take care of themselves."
The Denomination Effect
Mark Frauenfelder – Mark is the editor-in-chief of MAKE magazine and the founder of the popular Boing Boing weblog. He was an editor at Wired from 1993-1998 and the founding editor of Wired Online.
Mark Frauenfelder Credit.com contributor, editor-in-chief of MAKE magazine and the founder of the popular site Boing Boing, Mark was an editor at Wired from 1993-1998 and is the founding editor of Wired Online. He covers creative DIY projects and how-tos that will help you make the most of your money.
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I am also more likely to hold onto a dollar bill if it’s the only one in my pocket. So I’ve taken to carrying around a twenty dollar bill and keeping the rest of the money I took out in my locked cabinet at home. Sometimes I go weeks before I have to break that bill.
What also works wonders is emptying out all your small bills and change into a drawer when you get home every day. It eventually builds up into something and comes in handy during emergencies.
I must admit it’s been baffling me for ages.
You can keep a fifty euro bill on your wallet for weeks, but as soon as you buy anything with it (even if it’s a two euro cake), the rest of the cash disappears almost instantly.