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The small fortune hiding in your loose change

Your nickels and old pennies might be too valuable to spend

Source: U.S. Mint

The good news is, I've discovered what I call the “Instantly Double Your Money With Hardly Any Effort At All Plan” which, as the name suggests, enables anybody living in the United States to double their cash value without even having to work all that hard.

The bad news is, the plan's thoroughly illegal and has been for 8 years now: a federal felony punishable by up to 5 years in prison and $10,000 in fines.

So you definitely should not do this — at least, not yet. But there is a very good chance the plan's criminal status will be revoked sometime in the next decade or two, which means you can still use this plan to more than double your money with little effort — though you'll need to wait a few years.

How does the plan work? Easy: just hang on to your pocket change — or at least certain denominations of it.

If you're an American adult of any age, all your life you've heard about “inflation” or “the shrinking dollar” – basically, your money is worth a little bit less each year, and the same number of dollars that indicated solid prosperity in Grandma's day equals literal poverty now.

This is especially noticeable if watch old movies or TV shows, and pay attention whenever they discuss finances. Consider this line from the opening scenes of the 1948 movie Mr. Blandings Builds His Dream House, a screwball comedy about a rich Manhattan executive who decides to live in the wild and untamed suburbs of Connecticut:

Jim Blandings is part of the fabric of this town. … Jim's one of those bright young men from Yale. Advertising business, lovely wife, two fine kids, makes almost fifteen thousand a year.

“Almost” $15,000 a year made a four-person family in 1948 rich! Compare that to 2014, when a four-person household living on $23,850 per year or less is officially below the poverty level (and four people trying to live off twice that much still aren't doing very well).

Metal is worth more

So the dollar keeps shrinking yet our coins remain the same size, which causes (and has caused) genuine problems for the U.S. Mint, when the metal required to make a coin is worth more than the coin itself. That explains various coin changes in living memory: until the end of 1964, for example, all U.S. dimes, quarters, half-dollar and dollar coins were minted out of silver.

But rising silver prices (or the steady decline in the value of the dollar, whichever you prefer) eventually made silver too expensive to use as everyday currency, so starting in 1965, all formerly silver coins were minted out of copper and nickel layers — hence the little brown or red stripe you see on the rims of any dimes and quarters in your pocket right now. On the off-chance you see a dime, quarter or half-dollar without that reddish-brown rim, check the date: if it's 1964 or earlier, you have a valuable little piece of silver in your hands.

As of August 13, with silver trading at $19.81 per ounce, a pre-1965 silver Roosevelt dime is worth $1.43 for the silver alone, a pre-1965 Washington quarter contains $3.85 worth of silver, and a pre-1965 Kennedy or Franklin half-dollar is worth $7.16 (all values courtesy Coinflation.com).

Of course, even if you're scrupulous about checking the rims and dates on your pocket change (you'll also want to keep an eye out for any part-silver World War Two nickels, with their mint marks centered above Monticello on the “tails” side of the coin), you're not likely to come across many silver coins in circulation these days.

A penny for ...

Copper Lincoln pennies (Source: Coinflation.com)

Yet even without silver, there remain in circulation many common coins whose metal is worth more than their face value: mainly, copper pennies minted before the middle of 1982.

Modern pennies are made of zinc with a very light copper coating, and zinc is close to worthless. The actual metal in a modern zinc penny is worth a mere .005 of a cent: 200 pennies contain only one cent's worth of zinc.

Yet until mid-1982, pennies were made of copper. The Mint stopped making copper pennies in the early '80s for the same reason it stopped minting silver coins in the '60s: because the shrinking dollar relative to metal prices made it too expensive.

At today's copper prices, a copper Lincoln penny is worth slightly more than two cents for the metal alone (in addition to any collector's value such an old coin might have).

So any penny in your pocket dated 1981 or earlier is worth at least double its face value – except it's illegal to melt copper Lincoln pennies for scrap metal, and illegal to melt Jefferson nickels too (except for the silver war nickels). That's been the case since 2006, when rising metal prices, especially copper and nickel, meant it would actually be profitable to melt down certain coins in circulation — hence the then-new law making it illegal to do that, or to export such coins out of the country for melting.

The director of the U.S. Mint released a statement at the time, justifying the law by saying, “The nation needs its coinage for commerce … We don't want to see our pennies and nickels melted down so a few individuals can take advantage of the American taxpayer. Replacing these coins would be an enormous cost to taxpayers.”

So ever since 2006 it's been illegal to melt pennies or nickels for their metal content. The metal in a five-cent piece is currently worth slightly less than five cents, but when metal prices were high in 2011 the metal value rose to almost 7 cents — which is why there's a good chance the composition of the coins we call “nickels” is likely to change in the next few years, too. The Mint has been seeking Congressional permission to make cheaper nickels since at least 2012.

Coin cache

However: although you may neither melt pennies and nickels nor ship them overseas, on pain of prison and a $10,000 fine, it is legal for you to withdraw such coins from circulation by adding them to your own personal coin collection, whether that collection's stored in an elegant display case, old coffee cans in the back of your closet, or even a guarded warehouse.

In 2011, a hedge-fund manager in Dallas made headlines after he bought $1 million in face-value nickels – 20 million five-cent coins in all – and stored them with the expectation that sooner or later, the ban on melting copper pennies and copper/nickel nickels will be lifted, and he'll have a warehouse full of bullion to sell at a profit.

Similar melt bans have been lifted before: the ban on melting silver dimes, quarters and half-dollars ended in 1969, presumably after Congress or the Treasury Department decided “Silver is too valuable to keep such a large supply of it locked up in relatively low-value currency.”

And given how the U.S. dollar is worth slightly less every year – meaning the value of copper, nickel and other metals will continue to rise relative to the cash spending value of a U.S. penny or five-cent piece – sooner or later Congress or the Mint will make a similar calculation about the valuable copper and nickel locked away in our lowest-value coins.

Even if you're not a wealthy hedge-fund manager with a million dollars and a secure storage warehouse to spare, you can still set aside any good pennies and other coins you find in your pocket change – and if you have an account with a brick-and-mortar bank, they'll probably give you free paper coin-roll wrappers if you ask. They'll also sell you a roll of 40 nickels for two dollars — though if you want to and can afford to buy a million dollars' worth of nickels, you'll have to skip the bank and make formal arrangements directly with the U.S. Mint nearest you.

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