How to Cash in Your Nickel Collection

To make sense of this blog, you need to read the previous blogs we've written about nickels. First, we predicted nickel prices would go up, and they did. Second, we clued you in to it and told you to get to work on your nickel collection. 

The obvious question at this point is how to cash in your nickels. There are several ways.

1. The Illegal Way
It is illegal to melt U.S. coinage. However, in the future, its always possible that this law will be overturned. If metal prices ever go totally through the roof, like 25 cents for the metal in a nickel, then the government will surely overturn this law in order to increase the metal supply and reduce prices. So just keep your nickels until the law is overturned. Or, alternatively, you could just break the law and melt them yourself. I recommend putting them in your car and parking in the sun. That will probably melt them, but I don't really know how to go about cleaning them up later. Thats on you to figure out. The criminal mind will probably find a way.

2. By Exporting Them
Another way to make money off nickels would be to export them to a country that doesn't care about U.S. laws, such as China or Venezuela.  If you can find a way to get them to China without paying high shipping costs, this would work.

3. By Waiting for the Inevitable
My guess is the Treasury will eventually start making nickels out of something cheaper such as zinc or aluminum. Look for it in the news, because it will probably happen sometime in the next year or two as inflation keeps increasing. Once the new cheap nickels are in circulation, the price of the originals will go up all the higher as collectors, melters, and weirdos like me start hoarding them all. They will also get bought up by China and other places that will melt them freely. This is your chance to sell them off to people who want them.

4. By Waiting for THE FINANCIAL CRISIS THAT ENDS ALL FINANCIAL CRISES
If inflation gets too far out of control, the Federal Reserve will take the drastic step of hacking off zeros from all our bank accounts. Like I said, its a drastic step. However, if inflation really does go out of control, lopping off zeros is the only widely accepted solution, and its been done many times in the recent past. Brazil hacked off three zeros in 1994 and again in 1998. Zimbabwe lost three zeros in 2006. Israel knocked off 3 zeros in 1985. Turkey lost six zeros in 2004.  Like I said, its extremely drastic, but it is the widely accepted way of handling runaway hyperinflation. By "hacking off zeros," I mean dividing the value of paper money by 10, 100, or 1000 times. Inflation would have to increase significantly in order to warrant this kind of trick in the U.S., but in just the past 20 years a gallon of gas has gone from under $1 to around $3, and movie tickets have gone from under $5 to over 10. Don't even get me started on baseball tickets. So you can see that eventually such a step might be conceivable.

If this happens, there would be a mandatory trade-in of all currency. However, in the examples above, only the paper currency is revalued, leaving coinage intact.  Its much easier to demonetize your bank account electronically than to visit your house and hunt down your piggy bank. The government just assumes that people don't have more than a few pocketfuls of coins, so they leave you alone. Some freak with a basement full of nickels would get off pretty well in this situation. This has the effect of multiplying the value of coins while dividing the value of paper money. Your $10,000 savings account might only be worth $1,000 or $100, or 10, but your nickel would then be worth 50 cents, or $5 dollars, or $50. It sounds far fetched and drastic, but like I pointed out above, its happened several times in recent history, and there is no fundamental reason why it couldn't happen in the U.S. If such a thing happens, your $1,000 nickel collection would be worth $10,000, $100,000 or $1,000,000. If it gets as bad as Turkey, with six zeros being divided off, your $1,000 nickels would be worth $1,000,000,000. Yep, a billion.  If it does happen, you can cash in simply by spending your coins as money like you currently do. The only difference is they would be worth 10 or 100 or 1000 times more. Then you can tell your grandkids about how you used to buy "penny candy" and get a haircut for 10 cents, like your grandparents tell you. Economics works in cycles.

Again, let me say that this is an extremely unlikely scenario. First, inflation would have to go up massively before the Fed would even consider this. Second, the Fed would have to have the backbone to actually lop off everyone's bank accounts. The first step is somewhat conceivable, but the Fed growing a backbone is not.

Nickels Are Now Worth More Than Nickels Are Worth

A long time ago Howtomakeadollar suggested collecting a bunch of nickels, holding them until their metal value increased, and then selling them as metal. We stated this prediction clearly, and we personally guaranteed that nickel prices would go up, over 5 cents. Well, they did. On October 12, 2010, the metal value of a nickel went up to 6.104 cents, meaning that the nickel in your pocket right now is worth more as metal than as money. And its actually worth quite a bit more. Right now the nickel in your pocket has made you just over 20% in profit, without you doing anything at all, except fishing around your pocket and smiling contentedly to yourself.

Since this awesome website is called How to Make a Dollar, I suggest you go clean out your car, look for an old piggy bank, and check under your sofa cushions. See if you you can collect five dollars worth of nickels (100 nickels). If you can find $5 worth of nickels, you actually have $6 dollars. Thats how you can make a dollar off money you already have, without doing any work or risking anything at all. Kind of cool huh?

Well, a dollar is all well and good, but its not an inspiring amount. Thats why we suggested buying several thousand dollars worth of nickels. Going from five cents to six cents is a 20% gain. A twenty percent gain on $1,000 is $200. Does $200 sound like decent money? Its certainly better than a dollar. 

But don't cash out now. Inflation is probably going to be a major theme in the world economy over the next several years. That means that metal prices are going to keep going up. Hold your nickels, collect more of them, and wait until they double up to10 cents in value. If you think that's far fetched, consider that in 2007 nickel prices were up over 7 cents, so its not a big stretch to think they could go higher in the future. A penny from before 1982 is now worth 2.5 cents, meaning it has more than doubled in value. Dimes made before 1965 are now worth $1.68. Nickels are following this trend as well. Right now they are up 20%, but they will eventually double in value at least.

In many ways this was the first "real" idea that we suggested, and we've suggested many other good ideas since then. However, this idea requires very little work on your part, and absolutely zero risk. Nickels are a completely risk-free investment. Worst case scenario, you still have the same number of nickels and the same amount of money. You haven't lost anything. 

Its easy to collect nickels. Just go to your bank and exchange $10 cash for $10 in nickels, or $20 for $20, or whatever. Of course, nickels get heavy when you start going up over $10 worth, so remember to bring a backpack or something, and don't try to buy like $100 (2,000 nickels) at a time. Also, the bank tellers will look at you like you are a crazy person, but you can always turn the tables on them and just look back at them like they are the crazy ones. That always gets them.

How To Make Money At Christmastime (Supplemented)

A few more ways to make money around Christmas:

1.  Sal's vacation Army
This idea involves tapping into the Pavlovian urge to toss change into a red bucket at the sound of a bell around Christmastime.

1.  Dress up as Santa
2.  Buy a red cauldron (a bucket may work, but for best results use a cauldron, preferably with hanger)
3.  Buy a bell
4.  Position yourself outside of a popular store with said cauldron and bell.  You may wish to seek out a different entrance than the Salvation Army volunteer who is most likely stationed at the main entrance.
5.  Ring the bell vigorously.  Most people should not notice that you are not affiliated with Salvation Army in any way, but just in case, you could attach a sign to your cauldron that says "For Sal's vacation Army", with the "S" and "Army" in larger font.  This may fool the rest.
6.  Learn to live with the guilt.

2.  Post-Christmas Resale
You have most likely received a moderate to above-moderate amount of free things recently.  Some people call them gifts.  I like to think of them as opportunities to make money.  Immediately sell all of these "gifts" on ebay for maximum profit.

3.  Recycled Wrapping Paper
There is a segment of the population that actively looks to purchase things that are recycled, and another segment that loves finding bargains on Christmas items after Christmas.  Where these two segments intersect, you can find a profit.
1. Save a few empty cardboard wrapping paper rolls.
2. Gently unwrap any gifts you receive and keep the wrapping paper.  To maximize the amount of reusable paper, you could also offer (demand) to unwrap everyone else's gifts as well.
3.  Roll the used wrapping paper back onto the empty cardboard rolls.  You can combine different sizes and types of wrapping paper onto the same roll.  Secure the roll with a few rubber bands, tape, or even some used ribbon for extra flair.
4.  Sell the rolls to an environmentally conscious vendor.  Or sell them yourself from a cart outside of Target.
5.  For variation you could make a few rolls using paper that was completely trashed when the gifts were opened.  These you can sell for half price.

How to Make Money By Collecting Nickels

Bear with me on this one

Currently (Dec. 2009) U.S. nickels are worth five cents. The cost of the materials that nickels are made of (nickel and copper) comes to about 4.5 cents. So the face value of a nickel is slightly more than the cost of the materials. However, commodity prices are subject to fluctuation. In 2008 the amount of copper and nickel in nickels was actually worth about 6 cents. That means that if you had sold your nickels as metal, you would have made about a 20% profit. Not bad.

Commodities in general, and metals specifically, are expected to make significant gains in 2010 and for the foreseeable future as the dollar loses value. This means that the price of copper and nickel is likely to increase, while the face value of a nickel is likely to decrease. This means that in the future your nickels will be worth more for their metal content than as currency. In fact, I will go out on a pretty solid limb and personally guarantee you that sometime in the next two years, the value of a nickel will be higher for its metal than for its worth as money.

And its happened before too. Dimes used to be made almost entirely out of silver. However, in 1965, the cost of silver exceeded the value of the dime. So guess what happened? The government changed the makeup of dimes and started making them out of cheaper alloys. How much are pre-1965 silver dimes worth now? About $1.25. Imagine if you had stashed $1000 in dimes in 1965. A one-thousand dollar investment would now be worth $125,000. Thats hard to beat. Especially when you consider that there is no way to lose. More on this later.

Why does the price go up? Lots of reasons, but the big one is obvious. Once the government starts producing cheaper substitutes, the Treasury Dept. is going to start collecting all the more valuable originals to melt down and sell as metal. They aren't stupid. You can't keep producing coins that cost more to make than they are worth.

Once the majority of the valuable nickels are pulled off the market, the only ones left will be the cheap substitutes. Collectors will rush to get their hands on the original nickels. Other people will rush to melt them and sell them as metal. Either way, the nickel you bought for five cents will be selling for a lot more than that.

The best part about this investment is that you can't lose. Even if I'm wrong (never happened before) you can't lose. Lets say nickel and copper prices drop significantly and the government never starts using cheaper alloys. Well, your nickel is still worth five cents. You didn't lose anything. You can hold it for 50 years and never lose. Do you know of any other investments that can't lose value?

The downside is that you have to actually buy a crapload of nickels and keep them somewhere safe. To make it worthwhile you should probably buy at least $1000 worth, which would take up a lot of space and be very heavy.

You can go to banks and ask for $50 worth of nickels without attracting too much notice. Vending machine operators and fast food chains do this frequently. Just go to the bank once a month and buy a bunch of nickels. Eventually you will have a pretty big collection. Its an investment that can't lose, and will probably make major gains.