Wednesday, June 9, 2010

The Value of a Penny

It would appear that long ago the penny fell out of favor with the American people. Those copper coins stamped with Lincoln’s image are found behind sofa cushions, in junk drawers, stockpiled in gallon jugs, on sidewalks and in parking lots. Many of today’s young adults and youth see no value in the penny. Perhaps even you might not bend down and pick up a penny as it isn’t worth the effort.

Recently, I heard noted speaker, Brian Tracy, give an interesting example concerning the value of a penny. Mr. Tracy stated that if you started with one penny on day one and it became two pennies the second day; four on the third day; eight on the fourth day; sixteen on day five; thirty-two on day six and so on doubling every day for thirty days you would have at the end a total of $5,368,709.12. That’s right over $5.3 million dollars!

Hearing Mr. Tracy make a point of this little exercise, took me back to the days of my childhood. Occasionally, my parents and I would drive by a mansion on a little hilltop just north of Phoenix, Arizona. Every time, without fail, my father would point out that nickel’s built that mansion. He would go on to explain that it was the sale $.05 packs of chewing gum, that enabled William Wrigley, Jr. to pay for that mansion. By the way, the estimated cost of the Wrigley mansion in Phoenix was $1.2 million around 1930. Now that’s a lot of gum.

Back to Brian Tracy: he made the point that most people end the process around the tenth day when the value is $5.12. Spending at this point on a designer coffee or fast food lunch in a bag is really no big deal in our mind - after all its only $5.12. However in doing so, we short change ourselves and our future. Pun intended!

Some critics would say that such a doubling of a penny every day for a month is impossible in real every day life. Yes, that would be nearly impossible. However, the exercise proves the fact that every penny is valuable!

You remember the often quoted the phrase, “A penny saved is a penny earned.”? It was Benjamin Franklin’s wisdom that caused parents to coin the phrase in instructing their children on the value of money. Franklin’s adage equates saving with earning. A concept whose favor has fallen on difficult times as well.

Here are some helpful ideas to save those pennies:

  • Know what you need before you go shopping. Make a list and stick to it. It is so easy to get caught up in the “spending of the moment.”

  • Plan ahead for sales or discounted items. Most things go on sale in some sort of cyclical pattern.

  • Be an informed shopper. In this internet age you can be a very knowledgeable consumer.

  • Say “No” to using credit cards. Avoid the temptation to buy on credit what you can not afford to pay cash for.

  • Use coupons whenever you can. Little savings add up to big savings in a year’s time. Only buy products/services with coupons that you normally would. If you don’t use it or need it, it really isn’t a savings.

  • Buy in bigger quantities when practical to do so. Compare the price per ounce/serving before buying bigger quantities. Sometimes it costs more for bigger because stores know that consumers think bigger is cheaper.

  • Avoid name brands. Generic brands are cheaper and very rarely is the quality much different.

  • Take (pack) lunches, snacks and drinks from home. A bit of preparation before you leave the house for the day can save you big money away from home. It is nothing to spend $7.00 or more at lunch for fast food. Packed lunches are better in quality and cheaper. Plan ahead and save.

  • Take advantage of yard sales, thrift shops and websites like Second-hand bargains can save money as well.

Truly, pennies earned and/or saved do add up over time. You will be surprised at how much they accumulate with careful planning and spending. It does take discipline to keep at it, but the rewards are tremendous.