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April 10, 2012
Canadians Stop Making Cents
Should the U.S. follow?
Each of Canada’s 1-cent coins costs 1.6 cents to produce.
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Kelly Redinger / Design Pics / Corbis

Starting this fall, the Canadian government will stop minting pennies, and Canadian banks will cease distributing them.

Officials there estimate that each 1-cent coin costs 1.6 cents to produce. They think this is wasteful and that pennies are more trouble than they’re worth in everyday life. “Pennies take up too much space on our dressers at home,” Canadian Minister of Finance Jim Flaherty said during a speech.

People are being encouraged to turn in their pennies to banks so the coins can be recycled. Or they can donate the money to charity. Some new rules are also being created: If a person pays for something in cash, the last digit of their final total will be rounded to 0 or 5.

Does this mean that pennies will become useless in Canada? No—people with leftover pennies will still be able to use them to purchase items. Plus, credit cards and checks will still pay bills to the penny, even without pennies in circulation.

A PENNY LOST OR A PENNY GAINED?

Some people worry that because of the lost penny, minor inflation will occur. Inflation happens when prices for items increase. Experts think businesses may use the penny’s disappearance as an excuse to raise prices: for example, they could change the price on a 99-cent stick of gum to a dollar.

Other economists, or people who study trade and money, believe the change could lower prices. Some businesses might lower the price of that 99-cent stick of gum to 95 cents to be competitive.

The Canadian government thinks the overall effect of losing the penny will be small.

In fact, Canada is not the first nation to ditch the penny. Switzerland, the United Kingdom, and Brazil have all gotten rid of their pennies without problems. Could the U.S. be far behind?

No major plans to get rid of U.S. pennies exist. But Congress is studying ways to produce them more cost-effectively. The United States government spent $60.2 million making pennies last year, and some officials think spending that much money on cents just doesn’t make sense.



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