Money’s Vagabond Journey

You know that $200 deposit you made at Tower today? Well some of it is in your neighbor’s back pocket.

That’s the thing with money. You never know where it’s going to end up. In the case of your neighbor ending up with part of your deposit, it’s hardly out of the realm of possibility. You were at the Tower branch, completed your transaction and a little while later your neighbor came in to make a $200 withdrawal. He happened to go to the same teller you did and there you go, he is now carrying around what was your cash.

“Money is very liquid,” said Cindy Drexler, branch manager at Tower’s headquarters location in Laurel. “Usually it goes right out the door” with another member.

And don’t think it will burn a hole in your neighbor’s back pocket. Money is very well traveled. One marked $1 bill has made it 7,776 miles in three years, with stops that included Indiana, South Carolina and Greece, according to Where’s George, a website that tracks the circulation of U.S. currency.

But while the U.S. Treasury Department’s Bureau of Engraving and Printing prints billions of dollars a year, the money doesn’t last forever. It has a lifespan based on how much use it gets. Here is what the Treasury Department estimates. A $1 bill generally lasts 22 months. A $5 bill, two years. A $10 bill has an expectancy of three years and a $20 bill, four. Higher denominations, because they aren’t used as much, are in circulation for much longer. Both $50 and $100 bills have nine year life expectancies. And don’t forget coins. They usually circulate for 30 years, according to their maker, the U.S. Mint.

Paper money that is too worn for recirculation is destroyed by the Federal Reserve using a shredding machine and its face value is deducted from the total amount of money outstanding. Tons of bills are destroyed each week.

Right now there is about $1.2 trillion dollars of U.S. currency in circulation, according to the Treasury Department. And who says money doesn’t come cheap? Each bill is made on linen-based paper and costs only about four cents to make, though the cost varies slightly by denomination.

The amount of money people hold varies significantly—seasonally, by the day of the month, and even by the day of the week. For example, people demand a large amount of cash for shopping and vacations during the year-end holiday season. Also, people typically withdraw cash at ATMs over the weekend, so there is more cash in circulation on Monday than Friday.

When the public’s demand for cash declines—after the holiday season, for example—credit unions and banks find they have more cash than they need and deposit the excess with the Federal Reserve Bank. Because financial institutions pay the Fed for cash by having their reserve accounts debited, the level of reserves in the nation’s banking system drops when the public’s demand for cash rises; similarly, the level rises again when the public’s demand for cash subsides and banks ship cash back to the Fed.

The popularity of ATMs has increased the demand for cash and, in turn, upped the amount of currency credit unions and banks order from the Fed. A little known fact is that you are more inclined to get an older bill from an ATM than at a financial institution because new bills are more likely to stick together when dispensed.

So the next time you are making a deposit or taking out money, know that you are the latest link that is sending the currency on a journey that could lead just about anywhere.