The Psychology of Spending: Save Big by Carrying Big Bills

It seems it really is “all about the Benjamins.” A new study published by the Journal of Consumer Research,“The Denomination Effect,” has proven that people who carry around large bills (like the $100 bills with Benjamin Franklin’s portrait) are more likely to be more cautious about their casual spending than those who carry the same $100 broken out into multiple smaller bills.


In today’s economy, the need to be conservative with our spending is constantly tempted (and often thwarted) by the countless clearance sales and unbeatable prices we see as we walk past store windows or surf the web. As a result, it’s incredibly easy to stumble into a series of dropping a single $20 at one sale, and another $20 at the next and so on, until all that bargain shopping adds up to serious spending. (Even if you’ve saved over $100 with price reductions, you’re still chipping away at your savings.) And therein lies the problem, it’s easier to part with those twenties than it is to break a hundred dollar bill.

Looking into the psychological aspects of spending, the study concluded that people have come to overvalue large denomination bills, and undervalue small denomination bills. While you may be willing to part with a ten dollar bill without hesitation, the impulse to spend the same ten dollars is checked when it requires breaking a bill with a larger denomination – even if the spending is exactly the same.

But why are we so wary of breaking the big bills? It may be something as simple as not wanting to cram our wallets with all the smaller bills, or it could be our awareness that once that $100 bill is broken, we’re much more likely to start spending those fives, tens and twenties on smaller purchases that could easily be thought of as impulse buys.

Don’t have $100 to begin with? It works the same with much smaller figures too. In the study, 89 undergraduate students (the ultimate bargain-hunters, eaters of instant-Ramen and saddled with student loans) were given a single dollar to spend at their will. About half were given a crisp single dollar bill, while the other half were handed 4 shiny quarters. The results? 26% of the students who carried the single bill broke it and spent it, while 63% of the students carrying coins fixed their sugar cravings and bought candy.

So if you’re looking for new ideas to curb your spending, try carrying cash (it’s much easier to SEE how much you’re spending when you watch your wallet shrink than when you swipe a piece of plastic), and try carrying big bills. Most importantly, learn to value your money properly. Ten dollars is still ten dollars as a single bill or as one of ten that you get back after you break out Benjamin Franklin.