Researchers: To Save Money, Carry Big Bills

A new study suggests people might save some money by carrying around big bills. Priya Raghubir is the co-author of "The Denomination Effect," a paper that will be published in an upcoming issue of the Journal of Consumer Research. Host Jacki Lyden shares some of the highlights of Raghubir's research.

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Unidentified Woman #1 (Singer): (Singing) The best things in life are free, but you can give them to the birds and bees. I want money. That's what I want.


Yeah, right. Everyone wants money. I do, too, but how to keep from spending it? Priya Raghubir has a tip: carry big bills.

Raghubir is a consumer psychologist. A number of years ago, her son's behavior perplexed her.

Ms. PRIYA RAGHUBIR (Co-author, "The Denomination Effect"): He'd got a $100 bill from his grandfather, and he just would not spend it.

LYDEN: He would take the Benjamin out of his piggy bank and simply admire it. That got Raghubir wondering about something that she calls the denomination effect.

Here's the basic question. Are you more likely to hold on to five $20 bills or one $100 bill? Well, to get at the answer, Raghubir and a colleague conducted studies around the world, at a gas station in Omaha, Nebraska; a university in India; with a group of women in China. In that study, the women were each give 100 Yuan.

Ms. RAGHUBIR: And here we found that the women who had been given the single 100-Yuan note were less likely to purchase than those who had been given the same amount of money in smaller denominations.

LYDEN: She says all the studies has similar results and that people just don't hold on to large bills because they're inconvenient to break. Rather, for many people, spending a large bill is actually painful.

Ms. RAGHUBIR: I'm talking about a visceral pain. Yeah, it hurts.

LYDEN: This is especially true for tightwads - and yes, that is the technical term. Spendthrifts, on the other hand, don't feel such agony when we shop. That's actually part of our problem - I mean, their problem.

So, Raghubir hopes her research might help the shopaholics out there who are wanting to cut back on their spending.

Ms. RAGHUBIR: If they held their money in larger notes or constantly converted some of their smaller notes into larger notes, they would be less likely to spend some of those larger notes.

LYDEN: Priya Raghubir's research will be published in an upcoming issue of the Journal of Consumer Research.

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LYDEN: So let's see what we have here, one, two, three, 12, 13, 14, 15 single dollar bills. I think I have a problem.

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