I save down to 2" for myself. anything smaller goes into a box for a friend that had the patience to to work with tiny pieces. many pieces I send her end up in a cathedral window quilt she is hand-sewing. The rest she uses for the intricate dolls she makes.
Batting i save to use in purses etc.
Selvedges, trimmings etc. go into the trash. might seem wasteful to some, but I only have so much space. i know what i will actually use and what just takes up valuable space.