By Larry Teren
The saying “A Penny Saved is a Penny Earned” goes back in time even before Benjamin Franklin put it in writing in the 1700s. Maybe four hundred years ago you could buy plenty with a penny. Heck, even in the 1960s I was able to buy a variety of goods with a cent piece at the corner grocery store.
I used to collect pennies because they added up to good value. Five pennies bought a pack of baseball cards or fancier candy. If I found a penny lying on the ground, I pounced on it rather than walk past it with an uncomfortable disdain to show to anyone spying that I wasn’t that hard up.
Today, of course, a penny doesn’t mean much, especially if you use your debit card alot. In fact the value of money doesn’t hit home using a debit card. It just becomes a digital value that you trade for goods and services.
Inflation has a way of ruining the value of just about everything and the lessons that go along with it. I recently read that a 1906 penny would be worth about 18 cents today. (Of course, if you had one in mint condition, it could be worth a million.) Remember those glass jar top gumball machines? You put in a penny and cranked the knob and you just hoped that it was not the black colored ball that came out of the chute. Can you imagine today putting in eighteen pennies, cranking the knob eighteen times and hoping that what comes out is still not colored black? Or that something actually comes down the chute?
Somebody wrote that if one were to take a penny and stick it in a bank in 1546 at a measly 2% interest, in 2001 the account would hold $81.86. Of course, my answer to that is you are lucky today if you even get .30% interest- that is less than a third of one percent- in a so-called high-yield savings account. 2% interest is only a dream nowadays.
In Canada they argue about whether to dump the penny altogether. (Ed. note: as of February 2013, they have decided to eliminate the coin in cash transactions and round up or down to the nearest five cents. Only electronic and check payments will retain the actual amount.) The value of the penny has decreased to about 1/20th of its original purchasing power. The Canadians consider the penny a “burden to the economy”. They said it now costs 1.6 cents to produce every penny. The government estimates it loses $11 million a year.
The cost for the United States Mint to produce and distribute the cent is at its highest levels, and is now more than double the face value. As recent as September, 2011, it cost 2.41 cents for material and labor to produce one cent. Now you know why we need to borrow money from the Chinese.