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