A Beginner’s Guide to Paper Money and Coin Collecting

coin-collectingThe hobby of collecting currency – or Numismatics – has been called the “Hobby of Kings” and has been around since currency has been circulated. Paper money and coin collecting is also on the rise, in part because the world at large is shifting to electronic-based transactions, and also because physical currency has gone through so many changes as of late, making even currency from a decade ago rare to collectors.

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Collecting Paper Currency

Collecting paper money is very popular, partly due to its accessibility. When people travel to other countries, they usually bring back a few notes of foreign currency as souvenirs. These notes can vary greatly because they portray popular artists, events, and country leaders (new and old). Within the United States, our paper money has gone through many aesthetic changes over the past 20 years alone, with even more changes on the horizon (keep an eye on the $20 bill, as Andrew Jackson may not be gracing the front anymore).

The U.S. Mint is also not perfect, and misprints, mis-cuts (where bills are not cut into rectangles, but along odd lines) go for quite a lot of money among hobbyists. In theory, these mistakes are supposed to be destroyed to keep people from spending “fake currency,” but every once in a while, individual bills (and in some cases, entire sheets) will make their way out into the hands of collectors. Some of these collectibles can go for many times their original (or intended) value, and Numismatic investors often use leverage these items as capital or flip them for a price that is much better than waiting for a loan application to process.

Paper money is also fragile, and carries with it “grades” depending on how pristine the condition is. Much like with rare books, paper currency can acquire folds, tears, ripped corners, ink from external sources, detergent from going through the wash, etc., which can greatly devalue its worth. Also (especially in the case of United States dollars), after so many years, they are destroyed and/or taken out of circulation.

Coin Collecting

There are many aspects to coin collecting. There are those who follow only ancient and antique coins – such as those used throughout the Roman Empire or during the reign of Charlemagne. There are some who will follow specific coin denominations – such as Abraham Lincoln pennies – and even then will only seek out specific runs of those pennies within a given range of years.

As with paper currency, coins also come with grades, depending on their condition. Scratches, dings, dents, and wear (especially with older coins) impact the value of a coin. When it comes to older coins, one also has to figure in the context in which they were minted. A coin bearing the face of Emperor Constantine, for instance, may be auctioned off for many tens of thousands of dollars, because of what he accomplished, as well as being the emperor known for converting the Roman Empire to monotheism. During the First and Second World Wars, coins were made of different metals, because the copper and was being used for the war effort, so coins such as the penny were made with zinc and steel. (This is also why a 1943 copper penny is worth a lot of money, if you can find one.)

Coin collections are easy to start, and can be used to trade up to larger collections or collections of rare coins. In time, what starts as a modest coin collection can become a great investment that will mature in value over time. Eventually, such a collection can be used as collateral for a loan, or it can be sold for a handsome profit when large sums of money are more preferable to having assets that cannot be easily traded for things – such as houses, cars, and other items.