Are you literally throwing money away?
According to a report published last month by HM Treasury, six out of ten 1p and 2p coins are used in a transaction just once, before leaving the cash cycle.
They are either stuffed in a jar, or thrown away. Indeed, being thrown away is apparently the fate of almost one in ten 1p or 2p coins.
Incredibly, the Royal Mint issues over 500 million 1p and 2p coins each year, just to replace those falling out of circulation.
Granted, the purpose of the report, called 'Cash and digital payments in the new economy: a call for evidence', wasn't to complain about our collective profligacy.
Instead, it was to solicit views as to how much cash should circulate in the economy, and whether it any longer made sense to even have such low-denomination coins as legal tender.
More and more of us, pointed out the Treasury, made payments digitally--which handily, it added, served to make the 'hidden economy' and tax evasion much more difficult.
In fact, it added, while cash as a means of payment made up 62% of all payments by volume in 2006, this had fallen to 40% in 2016, and is predicted to drop to 21% by 2026.
Goodbye to all that
Predictably, the paper's publication caused something of a row, with Number 10 apparently getting involved. My guess is that while the 1p coin might be safe for now, it will eventually go.
I'm old enough to remember the halfpenny coin (both post-decimalisation, and pre-decimalisation), and before that, the farthing. They eventually disappeared, too, rendered pointless by inflation.
The difference between now and then, I'd suggest, is that fewer of those were coins simply discarded. Throwing money away, I'm guessing, is very much a product of the modern era.
Which is fairly odd behaviour. And remarkably short-sighted, when you think about it.
The UK economy has endured an 'earnings crunch' over the last couple of years, with prices outstripping real (i.e. inflation-adjusted) earnings growth. Consumer debt is rising sharply, the savings ratio remains low, and the outlook for many people's retirement looks just as murky as it did ten years ago.
Granted, automatic pension enrolment will make some difference, although it remains to be seen how many employees will remain enrolled after next April, when the level of employee contribution will have risen fivefold from the 0.8% introduced at the scheme's inception, to the 4% that will apply from April 2019 onwards.
Put another way, there's nothing in the above to suggest that throwing money away is rational behaviour.
Investing, on the other hand, is rational behaviour.
And money that is thrown away--or just stuffed in a jar somewhere and forgotten about--can't be invested. While I'm certainly guilty of tossing coins in a jar, every coin is zealously invested, and has been for years. Ditto the odd coins that I pick up in the car parks, or on the street.
In fact, my view is that an awful lot of people who don't currently save anything at all could fairly easily save £25 a month. And that people who currently save £50 or £100 each month could just as easily save rather more.
Particularly if they stop throwing coins away, and exhibiting similar profligate behaviour in terms of lifestyle choices such as too many takeaways, meals out, take-out coffees, and all the other temptations that modern life throws our way.
Let's run the numbers.
Over 25 years, assuming a fairly modest 6% annual return from the stockmarket, all those £25 monthly savings will have amounted to £17,411. Save £50, rather than £25, and this doubles to £34,823. And so on, and so on.
Plus, the amount that people can comfortably afford to save won't stay as a fixed amount over those 25 years: someone saving £25 as (say) a 25-year old could easily save several multiples of that as a 35-year old or 45-year old. And thereby, secure themselves a better future.
But to do that, behaviours need to change. Change how, precisely?
- If you're not currently saving regularly, consider doing so.
- If some of those savings aren't destined for stockmarket-based investments, you should certainly consider doing that.
- If you don't have retirement savings, it's time to have some. No ifs, buts, or maybes.
- And if you currently throw away 1p and 2p coins... well, do I have to spell it out?
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