Inflation has hit the humblest of financial instruments. In the American government’s recent budget, the Obama administration revealed that pennies cost 1.8¢ to make, while nickels run 9¢ per coin. The U.S. treasury has spent $100 million more in some years than the currency is actually worth.

The rising costs of zinc and copper are to blame, so fashioning the coins out of a cheaper material is, naturally, the ideal way to tackle this problem. Scott Travers, author of the Insiders Guide to U.S. Coin Values 2010 says aluminum would be the likely alternative, estimating it would cost about 0.62¢ to make a penny out of the metal.

Making the coins smaller would also work, says Travers, adding that producing a penny and nickel that are smaller than the dime makes logical sense, considering their face values. Another option? Get rid of the costly coins. “With the possibility of monetary inflation, pennies and nickels soon won’t mean very much anyway,” he says.

Making these types of changes is easier said than done — zinc lobbyists are a powerful group. Vending machine companies would also take issue; millions of machines would have to be overhauled to accept new coins.

Until that happens, though, you might say a penny saved is almost two pennies earned.

Appeared in March 15 issue of Canadian Business magazine

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