Livin' large: Study shows people spend less when carrying big bills
The study, by The Journal of Consumer Research, found that people were more tight-fisted with their money if it's in a few large-denomination bills, as opposed to many small ones, according to a short story in the New York Times.
This makes sense, when you think about it. I'm less likely to break a $20 bill for a small purchase, such as a soda, than I would be if it were a dollar bill. I think I'm also less likely to even purchase the soda if I had a $1 bill in my pocket, as opposed to change.
The study found that 63% of test subjects chose to buy candy when given four quarters. But the number dropped to 26% who bought candy when given a $1 bill. So the denomination effect even works with small bills.
"People overvalue these large bills," said Joydeep Srivastava, a professor of marketing at the University of Maryland and one of the study's two authors. "It's partly a self-control mechanism -- I want to hold onto it, because if I do break that big denomination, I lose track of my spending."
True. Try carrying around only bills, and not change, for a week and see how much longer your money lasts. The study notes, however, that this effect is stronger in markets like China and India, where cash -- and not credit cards -- is still king.