Want to Spend Less Money? Try This Secret — Dollars and Sense
You might have a pocketful of cash — but the size of those bills matters when it comes to how much of it you’re likely to spend.
A new paper set to be published in the Journal of Consumer Research by marketing professors Priya Raghubir and Joydeep Srivastava indicates people tend to spend less when they have larger bills, and more if they’re carrying smaller denominations.
It comes down a theory informally known as “mental accounting.” Smaller bills tend to be assigned to something like a mental petty cash account, so we’re willing to drop them on petty things like coffee or snacks. On the other hand, larger bills are generally thought of as “real money,” meaning we’re reluctant to spend them on things that aren’t of real importance.
As a result, experts say an easy, painless way to save money is to ditch those singles and carry bills in denominations of $20 or more.