‘Dirty money’ affects spending habits, new study finds

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Looks matter – even when it comes to money.

A new study co-authored by a University of Guelph professor has found that currency’s physical appearance dramatically affects consumer behaviour.

People are more likely to spend dirty, crumpled currency and hold on to new bills, according to the study forthcoming in the Journal of Consumer Research and available online now.

But in social situations – and especially when they’re looking to impress someone else — people reach for new bills even when they have older, higher-denomination currency on hand.

“Basically, the physical appearance of money matters more than traditionally thought,” said Theodore Noseworthy, a professor in Guelph’s Department of Marketing and Consumer Studies who conducted the research with Fabrizio Di Muro of the University of Winnipeg.

It’s an important finding for many reasons, Noseworthy said, primarily because it challenges some long-held beliefs that we perceive only the nominal (face) value of money.

“We tend to regard currency as a means to consumption and not a product itself. In other words, it should not matter if it’s dirty or worn because it has the same value regardless,” he said.

“But what we show is that money is indeed a vehicle for social utility, and that it’s actually subject to the same inferences and biases as the products it can buy.”

In five different studies, the researchers gave subjects new or old bills and asked them to shop and spend. In all of the studies, people spent more and took more chances with old, worn money.

All of the studies found the same main reason: people’s aversion to “dirty money.”

“It’s the ‘ick’ factor,” Noseworthy said. “The idea of touching something that others also handled: people want to rid themselves of worn currency, because they are disgusted by the contamination from others.”

He said people value a crisp new bill because they take pride in it, especially when they can spend it around others. People were more likely to spend more of their new-looking currency, even if they had to use four $5 bills rather than one crumpled $20 bill.

“It turns out money itself can be part of conspicuous consumption,” Noseworthy said.

This research has caught the eye of authorities who print new currency and take “old” money out of circulation, particularly in an economy driven by consumer spending, said Noseworthy.

The study might also interest Canadian authorities, who recently introduced more durable polymer bills that will likely look “new” longer.

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