Story of a $50 note found af­ter 20 years – and its lost value

Auckland City Harbour News - - NEWS -

This is the story of $50 I was paid about 20 years ago when I lived in Welling­ton and was bump­ing along hap­pily in a rel­a­tively lowly paid hand-to-mouth kind of ex­is­tence.

I was paid by cheque in those days and I’d go straight to the Na­tional Bank branch on Courte­nay Place to cash it.

My pay, as is of­ten the case for young men, was largely spent on rent, food and booze.

Gen­er­ally af­ter pay day I had cash and then through­out the week, my cash store would di­min­ish un­til I was hang­ing out for pay day again.

Dur­ing this pe­riod I clearly had a less-than-healthy re­spect for money, so much so, I used one $50 note for a bookmark.

I found it again the other day when go­ing through old books stored in boxes un­der the stairs.

The note was pre-1999 and was made of the old pa­per and cot­ton mix that came be­fore the tough poly­mer notes we use now. What to do with it? The ob­vi­ous choice is to send it to the Re­serve Bank and get it swapped for $50 spend­able dol­lars.

That in­volves ei­ther walk­ing into the Re­serve Bank in Welling­ton or send­ing it in, to­gether with the cor- rect form, and ask­ing the Re­serve Bank to pop $50 into my bank ac­count. The cen­tral bank will swap old money (of which there is a sur­pris­ingly large amount still out there) for new at face value.

When you think about it, roughly 20 years spent sand­wiched in that book didn’t do my $50 much good. It got musty. It also lost value. The spend­ing power of my $50 back then was roughly the equiv­a­lent of $78.50 to­day, ac­cord­ing to the Re­serve Bank’s in­fla­tion cal­cu­la­tor. My note lost more than a third of its spend­ing power. That’s the cor­ro­sive power in­fla­tion ex­erts on money.

No won­der the Re­serve Bank has dubbed it ‘‘the thief in your wal­let’’.

My $50 was also de­nied the chance to earn a re­turn. It could have been in the bank, in­vested in the share­mar­ket or money on a mort­gage.

Had I stuck it in the bank and left it there for 20 years earn­ing a 1.5 per cent ‘‘real’’ rate of re­turn af­ter in­fla­tion and tax, my $50 would have grown to a value that would buy me around a third more to­day than the orig­i­nal money would have bought me all those years ago. I’d have got the bet­ter of in­fla­tion. Now imag­ine I’d sunk that $50 into eq­uity in a house. It would not only have earned a bit of cap­i­tal growth, but it would have saved, at an av­er­age bor­row­ing rate of 8 per cent, in­ter­est of an av­er­age of $4 a year.

There aren’t many share funds that have been around for 20 years, thanks to the con­tin­ual open­ing and clos­ing of them thanks to fund man­agers shut­ting up shop or buy-

sav­ing me ing one another. One that has is OneAn­swer’s sin­gle as­set class New Zealand share fund launched in March 1991. Its per an­num re­turn, af­ter fees but be­fore tax, since launch has been just un­der 11 per cent, a long way ahead of what the bank would have paid me.

Bank de­posit, prop­erty, share­mar­ket – three places my $50 would have fared bet­ter than keep­ing my place in a novel I never fin­ished.

On its own, the fate of my $50 is in­ter­est­ing but doesn’t amount to much. It’s the sum of the use of all the $50s that come a person’s way that re­ally counts.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.