Dirty Money: Consumers Spend Crumpled Bills Faster, Study Reveals

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Researchers say that consumers would rather spend the old, crumpled bills in their pockets than the clean, crispy ones they just got out of the ATM.

The Financial Ramblings blog flags a study out of the Journal of Consumer Research that examines how the appearance of paper money influences consumer spending habits.

"People want to rid themselves of worn bills because they are disgusted by the contamination from others, whereas people put a premium on crisp currency because they take pride in owning bills that can be spent around others," concludes the study, which was conducted by two marketing professors in Canada.
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(Speaking personally, I also have a tendency to spend my crumpled bills first, but for a different reason: I want to save my crisp dollar bills for the vending machine. That's less of a factor now that many vending machines take credit cards, but I still try to liquidate my gross bills first and leave the crisp bills in my wallet. )

The study gives us an idea for an economic stimulus plan: Instead of putting crisp new bills into circulation, the Mint should crumple up its bills and rub them in dirt before issuing them to banks. People will be so eager to get rid of the dirty bills that consumer spending will inevitably rise, and the economy will be stimulated without spending any taxpayer dollars.

But it's not a simple matter of consumers being more eager to spend dirty bills: The study also suggests that when other people are around, you'll be more eager to spend the crisp ones. We suppose there's a social currency (no pun intended) to paying your check with a stack of crisp twenties as opposed to a fistful or rumpled dollars that look like they came out of the gutter.

How about you? Do you find yourself trying to get rid of your crumpled, dirty bills before you use the crisp, new ones?

Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.

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Dirty Money: Consumers Spend Crumpled Bills Faster, Study Reveals

From taxes and credit to saving and money management, you can get lost in the complexity and abundance of financial issues. But by learning some simple fundamentals, you can take control of your finances and feel secure in your money management skills.

How well do you know the basics of personal finance?

Put your knowledge to the test with this 12-question quiz.

A. Under your mattress
B. Stocks
C. Bonds
D. Bank savings account
You want money you plan to use within the next three to five years to be safe and easily accessible. Lock it up in a savings or money market account. You won't earn much interest on it with rates so low, but you also won't lose any of it to the volatility of the stock market. You can find search for which accounts are offering the best rates on Bankrate.com.
A. Suck up to the boss
B. Get a second job
C. Adjust your tax withholding
If you typically get a tax refund each spring (and most of you do), file a new Form W-4 with your employer to increase the number of exemptions you claim - and lower the amount Uncle Sam takes from your paycheck. Try our easy-to-use tax withholding calculator to help you figure the right number for your situation.
A. Pay bills on time and keep credit-card balances low
B. Limit applications for new credit and keep old accounts open
C. Sweet-talk the credit-card company phone rep
The simple act of paying bills on time and keeping your balances low accounts for 65% of your credit score. New credit and the length of your credit history make up 25% of your score. The remaining 10% factors in the types of credit you use. Sorry, sweet-talking will get you nowhere.
A. Treasury bonds
B. Money market account
C. Stocks
D. Residential real estate
Stocks fare best over long stretches of time. Take the 20-year period through 2012, for example. The average taxable U.S. money-market fund returned 2.8% annualized. Residential real estate, as measured by Standard & Poor's Case-Shiller index, did just slightly better with 3.0% annualized. Barclay's U.S. Treasury index earned 6.3% a year, on average. And the S&P 500 trumped them all, delivering 8.2% annualized.
A. Life insurance
B. Health insurance
C. Auto insurance
You only need life insurance if you have someone depending on you financially. Bob is unwed and childless, so he doesn't need it. However, he will need health insurance and auto insurance to protect himself against disaster.
A. 401(k)
B. 529 plan
C. Municipal bonds
D. Certificate of deposit
E. None of the above
A bank CD falls under federal protection if it's FDIC insured. That means up to $250,000 is protected in case a bank goes under, and you get up to $250,000 of insurance at each bank where you buy CDs. Municipal bonds, 529 plans, 401(k)s and other investments are not covered. You invest at your own risk.

Ashley, age 20, contributes $3,000 per year to an individual retirement account for ten years, then stops, letting her money sit in the account. Adam, age 30, contributes $3,000 each year to an IRA for 35 years. Who will have more money at age 65, assuming they get identical investment returns?

 

A. Ashley
B. Adam

Ashley comes out ahead, thanks to the magic of compounding. Even though she stopped contributing after only ten years, her money will grow to about $694,000 by the time she retires, assuming an 8% annual return. Adam, who got a late start, but pitched in more money out of pocket, will amass about $558,000.
A. Your credit score
B. Your car make and model
C. Your car color
D. Your address
Insurers look at a variety of factors to calculate your risk, but the color of your car isn't one of them. Your financial habits, the type of car you drive and where you drive do matter.
A. At age 16
B. At age 18
C. When they get their first job
D. When their income reaches certain levels
A child's age or job has nothing to do with it. Rather, the IRS cares about how much the child made and the source of the income. For example, children who have investment income of more than $950 or have wage income of more than $5,950 in 2012 need to file a return. Children who receive a paycheck and have taxes withheld may want to file even if they don't have to - they could reclaim most or all of their income taxes.

You can withdraw contributions you made to a Roth IRA at any time, for any purpose without paying any taxes or penalties, and without having to pay it back - ever.

 

A. True
B. False

Any money you put into your Roth IRA is yours for the taking - even if you aren't retired. The money your account earns, however, cannot be touched until you're 59½ and have had a Roth for at least five years. Otherwise, you'll owe taxes and a 10% early withdrawal penalty on earnings. An exception: Once the money's been in your account for five years, you can tap your earnings to buy your first home.
A. Cry
B. Notify your bank and credit-card companies
C. Contact the credit bureaus
D. Call the Social Security office
Put your tears of frustration on hold. First, notify your credit-card companies and bank to monitor your accounts for fraudulent charges, just in case your wallet falls into the wrong hands. Second, contact the credit bureaus and put a fraud alert on your report. This will require lenders to make an effort to verify your identity before issuing new credit in your name. It also gives you a free copy of your credit report so you can review it for suspicious activity.

A. Upgrade your lifestyle: You've been pinching pennies for too long. It's time to reward yourself and live it up.

B. Maintain your lifestyle: Take this opportunity to pay off your high-interest debts and boost your savings. It's time to get ahead. 

Sure, it's tempting to spend the money, but using it to strengthen your financial footing is the smarter choice that'll pay off exponentially in the long run.

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