How often does a banknote change hands?

If you’ve ever received a rather tatty-looking banknote, you may have wondered how many hands it has passed through on its journey to your wallet, purse or pocket.

Well, On Stride Financial has now worked out its journey by calculating the velocity of a British banknote. To to this, it multiplied the total money in the UK’s supply (M) by how fast it moves around the economy (V). This equates to the price level (P) multiplied by the total value of goods and services in the economy (Q), leaving them with the equation MV=PQ. Breaking down this amount by payment method (and so excluding any non-cash transactions) and by each denomination, left them with the number of each type of UK banknote making its way around the UK.

Even though we are now making more and more payments online and with credit or debit cards, and so are handing over fewer banknotes than ever before, the number of times our money changes hands is still quite impressive.

  • A £5 note has a life span of 23 months and is exchanged approximately 258 times in that period.
  • A £10 note is removed from circulation after 36 months, by which time it has gone through 594 exchanges.
  • A £20 note lasts about 113 months and changes hands 2,328 times in its lifetime.
  • A £50 note is exchanged just 227 times before becoming unfit for circulation around 492 months later.

With 1.7 billion £20 notes (worth £35,160,000,000) in circulation, it is clearly the most popular banknote, moving though the population at a much faster rate than the less durable £5 note, of which there are just 305 million (worth £1,525,000,000).

These values are for the paper banknotes currently in circulation, but when the new polymer notes are introduced to the UK, their life span will be much longer, thus allowing them to survive many more exchanges. For example, a polymer £50 note is expected to last over a century (approximately 1,230 months), helping to reduce the number needing to be produced.

So next time you hand over some cash to pay for your shopping, take a moment to consider that little note’s incredible journey. Just try not to think about how many germs it’s picked up along to way, too.

To find out more about On Stride Financial’s research, visit their website.

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