Thursday, April 16, 2015

How Many $1 Bills?

Economists study many things and one of them is cash, tracing its flow into and out of your wallet. They collect information about how we use cash through the Diary of Consumer Payment Choice, in which a representative sample of the public records its purchases for three days. The survey collects information on how much cash people have at the beginning of each day (including cash denominations) and how they pay for purchases throughout the day. Here are a few of the findings from the 2012 survey...

Percentage of consumers...
With cash at the beginning of the day: 81%
With a $1 bill at the beginning of the day: 64%
Who made a cash transaction during the day: 50%

At the start of the day, consumers had a median of two $1 bills. That's not some random number. The Fed analysis finds that we actively manage our $1 bills. We don't want too many, but we also don't want to be without. The sweet spot—the target number of $1 bills we want in our wallet—is between two and three.

Source: Federal Reserve Bank of Boston, U.S. Consumer Holdings and Use of $1 Bills

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