UTXOs are the pieces of Bitcoin you actually own. Imagine them like bills in your wallet. If you have 3 separate $20 bills, you really have 3 UTXOs worth $20 each, not just ‘$60’ in one lump. When you spend, you hand over one or more whole bills, and if it’s too big, you get change back as a new UTXO.

If you always spend big bills, you’ll keep getting lots of small ones as change. Over time, your wallet might fill up with hundreds of $1 bills -which makes it slower and more expensive to pay (since each bill must be counted in the transaction, i.e. more transactions on block leading to higher fees). Good UTXO management means keeping a good mix of bill sizes so payments stay cheap and flexible.