When I visit my grandparents, they always talk about how expensive everything is. Often they ramble off a list of things they could buy for a penny when they were my age: candy, bread, shirts, toys and so many more things.
Part of me thinks that inflation and cost of living increases haven’t really set in for them yet, but back in the day a penny bought a lot. You can’t argue with that.
It got me thinking about what a single penny could buy today, which isn’t much of anything. In fact, you can’t even make a penny for a penny. CNNMoney says, “The U.S. Mint spent 2 cents to produce and ship each of the 5.8 billion pennies sent to banks last year.”
So it costs more to make and transport pennies than they’re actually worth, which begs the question: Should the U.S. ditch the penny?
Is a Penny Saved a Penny Earned?
The penny buzz picked up in recent weeks after President Obama mentioned eliminating the denomination.
This isn’t a new issue though. In the past few decades, several politicians have suggested getting rid of the penny. Our friends over at Quizzle note that public out cry and lobbying efforts saved the penny from extinction many times.
We’re attached to the penny and think about it constantly, so how could we imagine getting rid of it? We look for places in our personal budgets to save pennies. We’re taught that cutting a few cents here and there add up to big savings in the end.
Even though the U.S. government uses more time and resources to make a penny than what it’s actually worth, we put this small denomination on a tall pedestal as the key to saving.
After all, a penny saved is a penny that stays in your pocket.
Furthermore, The Economist notes that eliminating the penny could cost the U.S. Mint more money. Experts think that ditching the penny would mean more dependency on the nickel, which costs over 11 cents each to produce. This move could cost taxpayers millions more each year.
Advocates of keeping pennies also suggest that prices will increase across the board. After all, if things are rounded to the nearest nickel, your $2.03 cup of coffee will cost an extra two cents. That extra two cents adds up after a few weeks.
Dropping the Denomination
Despite these drawbacks, several countries have eliminated their smallest currency denomination.
The New York Times says, “A number of countries, including Australia, New Zealand, Brazil, Finland, the Netherlands, Norway, Sweden, Switzerland and Britain, have already dropped their lowest-denominated coins, without dire consequences.”
Experts also suggest that our attachment to the penny might be slowing us down. CNNMoney notes that about a year ago, Chipotle tested rounding totals to the nickel amount – thinking it would save cashiers and customers time.
Cashiers save time by not having to fumble with making change and counting their tills at the end of shifts. Owners hoped that this could speed up customer service. However, customers weren’t happy about the price changes, and Chipotle quickly reverted back to counting by the penny.
Today, one of the top concerns of U.S. citizens is getting the U.S. budget under control. According to Coin Update, “The production and distribution of the penny generated a loss of $58.0 million.”
Getting rid of the penny could cut millions in the U.S. budget. Canada estimates ceasing pennie production will save taxpayers about $11 million dollars a year. Although the savings seems small, it could help save other necessary government services.
From a business standpoint, almost any company would have probably gotten rid of the penny years ago since it costs more to make than it’s worth. On the other hand, most of us want to save our money – even if it means a penny here and there.
What do you think? Should the U.S. Mint ditch the penny?
“Should the U.S. Mint Ditch the Penny?” was written by Krissy Schwab for QuickenLoans.