A friend observed a contradiction between two of my articles. In one I point out that it’s important to pay attention to small amounts because they can add up. In another I argued that pennies are a waste of time. In fact, I routinely refuse pennies in change from cash transactions.
So, which is it? Do small amounts matter or don’t they? It depends on how small the amount is. If you spend $10 on fancy coffee and donuts, that is wasting the equivalent of a thousand pennies. The difference between a penny and a ten-dollar bill is the same as the difference between running to first base and running a marathon.
The average cash transaction will produce about two pennies in change. I average 2 or 3 cash transaction per week. So, I’m refusing about $3 per year in pennies. It would take me more than 3 years for this to add up to spending $10 on coffee and donuts once.
Thirty years worth of pennies invested at 8% interest with 3% inflation would have a present value of about $150. I’m willing to forego $150 once for the privilege of never having to handle pennies for the next 30 years.
So, small amounts matter, but pennies are too tiny to qualify as even a small amount. It's important to maintain a sense of scale when it comes to your finances. You'd need to save a thousand pennies to make up for wasting $10 on a snack, and you'd need to avoid a thousand snacks to make up for spending $10,000 too much on a car.