The Exchange

‘Dirty’ Money Affects Spending Behavior, Study Finds

The Exchange

A dollar, it turns out, is not always a dollar.

View photo

.
You see that worn-out old fiver in your wallet? You're more likely to spend it than you would the brand-new bill next to it. That's what two Canadian professors found in a recent study published in the Journal of Consumer Research.

In a paper titled "Money Isn't Everything, but It Helps If It Doesn't Look Used: How the Physical Appearance of Money Influences Spending," Theodore Noseworthy, associate professor of marketing at the University of Guelph, and Fabrizio Di Muro, assistant professor of marketing at the University of Winnipeg, say a currency's physical appearance can alter someone's spending behavior. It turns out people want to get rid of crumpled old bills more than they do fresh ones.

The findings challenge the notion that money is fungible — meaning that one $10 bill is as good as another $10 bill and that people only perceive the face value of money, and not its physical appearance or condition. "It shouldn't matter what money looks like," Noseworthy says. "But we show it does matter. If I gave you a crisp, new $20 bill, I don't want you to give me crumpled bills back."

The Ick Factor

So why would we rather go out of our way to hold onto new bills and get rid of older bills? As with other consumer goods, people tend to favor the new over the old. "We tend not to like money that looks like a lot of others have touched. It's gross," says Noseworthy. "People want to get rid of worn currency because they're disgusted by the contamination of others." And they tend to spend those worn-out bills faster.

In one phase of the study, subjects were given $20 (either worn or crisp bills) and assigned a shopping task. They were told they could spend as much as they liked on a selection of products of varying prices in a mock retail lab (under the guise that the researchers were interested in how they prioritized their spending). Participants given the worn money spent more on average than those with the new bills.

"Where someone with a crisp bill would tend to hold on to it… someone with a worn bill tends to use it as soon as they get it," says Noseworthy.

The look of money also impacts our willingness to take risk with that money. In another phase of the study, participants were awarded $10 (either a worn or crisp bill) for completing an anagram successfully, and then given the option to "gamble" that money on one more anagram question. If they got it wrong, they'd lose the $10; if they got it right, they got $20 (either a worn or crisp bill which the participants saw in an envelope). Participants who got the worn $10 and were enticed with a new bill were more likely to gamble their money than those who were awarded a crisp bill and enticed with a worn one, and they also gambled more than those who were awarded and enticed only with worn bills.

The Social Factor

Adding a social element to the mix, however, reversed that behavior in another experiment. When they believed they were being monitored by peers, participants were far more apt to spend a brand-new bill.

The participants were more likely to spend more of their new-looking money, even if they had to pull out four freshly-printed $5 bills rather than one tattered $20 bill. "People put a premium on crisp currency because they take pride in owning bills that can be spent around others," the authors say.

Turns out money isn't viewed merely a means of acquiring products but as a product for consumption itself, Noseworthy says.

View Comments