A nickel is only worth 5 cents, according to the latest market data. It would take about 62 years for that nickel to become a dollar if I put it in a high-yield savings account. Even if the market grew at 10% annually (which it won’t) it would take more than a century for that nickel to be worth $1000. On the other hand, by the time of America’s Quincentennial celebration it would be worth almost $94 TRILLION in today’s dollars. So yes, as Albert Einstein said, the greatest mystery in the universe is compound interest (although I suspect hairbrushes might also have eluded him).
I noticed a nickel lying on the floor of my office this morning, so I picked it up. No big deal. Earlier this morning, I noticed a penny on the ground and walked right on by without taking it. No big deal. Now be honest – if you see a penny lying in the street you probably don’t stoop over to pick it up most of the time. You’re too busy, or in too much of a hurry, or your back is a little stiff or you simply don’t care because it’s a stupid penny that can’t buy anything by itself. When do you stop? For me, a nickel was worth it. I am sure almost all of us would stop if we noticed a $20 lying on the ground. You might look around to find out who owns it, but is there ever a time you might just leave it there because you were in too much of a rush? And how many pennies have you passed on the street in your life – and how many twenties? You are far more likely to see one than the other. 2000 times more likely? Possibly.
Saving is like this. Of course there are the big items:
- I resisted the urge to buy a plasma TV! $4000 saved!
- We bought a 3-bedroom house instead of a 4 bedroom house for our 3-person family! $50,000 saved!
- I drive a 6-year-old Pontiac instead of a brand new BMW! $30,000 saved!
Most of us who are careful about our personal finance are past that stage. We generally know what the big stupid items are, and we avoid them. But do you pass up on the pennies?
- I don’t like to deal with coupons because it’s too much effort to keep track of them.
- I buy botted water instead of using a Sigg bottle filled with tap water because it tastes different.
- I don’t count my change because so what if they missed a penny.
- I’ll remember to fill up at the cheap gas station next time.
- If I drop a penny, I have to keep on walking – late for that big meeting at 9, after all.
These are the mental battles you have to fight and win to become truly smart about your finances. Savings opportunities like these are everywhere, and every day people choose to pass them up because they are a little too demeaning or seem pointless. I try to convince myself it is worth the 1.5 seconds of my time to bend over and pick up a penny, and tell myself it is not. That means that I am effectively valuing my time as being worth more than $72,000 per year – $36 per hour. OK, maybe – I live in New York and my time/value equation is skewed. But failing to stop and pick up a nickel would mean I value my time as more than $350,000 per year. Clearly in both cases the investment in time is worth something.
I myself hardly ever count change, and I hate coupons. But despite myself, I am trying to notice little chances like these and take advantage of them. Who knows – maybe thanks to me picking up a penny or five one of my great-great-great-grandchildren will be a trillionaire.