5 Reasons Using Cash Doesn’t Actually Save You Money
You’ve seen the blog posts, read the financial books, and heard the advice. Carrying cash and leaving the debit and credit cards at home will supposedly reduce your spending, in some cases by staggering numbers. Supposedly, it’s more painful to use cash because its more visual and has a greater connection to wealth. But it isn’t that simple. Here’s why using cash doesn’t save you money and what to do instead:
1. The “money connection” is over
You aren’t your parents. You’re definitely not your grandparents. While a generation raised on cash and paper forms might still feel the kick in the wallet from dropping a twenty, millennials were raised on a different financial system. For many of us, swiping pieces of plastic has been first nature. Increasingly, in a globalized, digital economy, cash itself is the outlier. The connection between bank account and pieces of paper has never, at any time in history, been a more shaky relationship. Millenials and younger generations don’t connect the financial numbers, apps, and Venmo receipts in the same way as older generations did.
2. Access to financial information
We all walk around with bank account information on our phones, and can perform transactions from anywhere. Bumping that same phone against a register can fund our latest clothing purchase through Google and Apple pay. We’re no longer limited to the money in our wallet and we know that and are used to it. While previous generations might have been amazed at how quickly they could access funds and justify purchases, younger people aren’t fooled by the piece of plastic. Millennials know that access doesn’t equal money to burn, and availability doesn’t mean it should be used.
3. Cash is outgoing money
Cash now feels like money that is already gone, already spent. Most people never deposit cash into their bank account anymore, meaning that money always feels like outgoing cash flow and never feels like an incoming cash flow. You aren’t paid in cash, you’re paid in direct deposits, checks, and numbers on a screen. Once money is in your wallet the only direction it will go is outward to purchases. Money in your bank account, on the other hand, can stay there as long as it wants. Money in the bank account is money earned, stable money, money that has staying power. Wallet money is money to burn. Reducing the cash in your wallet can actually limit spending, not the other way around, so often paraded about by financial gurus.
4. Know yourself
For some people, for idiosyncratic reasons, cash will limit spending. If this is you, then it’s great that you know that about yourself and do your best to follow it. But cash and spending limiting is not a one size fits all solution, like it’s often advertised as. Know yourself. Know how you think about money and what will work for you.
5. It’s a numbers game
Instead of thinking “paper means spending less,” the best thing you can do to cut spending now is to get comfortable with accessing digital numbers on your bank account and learning what they mean. Budget on your phone, track purchases on your phone, and check your bank account on your phone. Instead of thinking that cash limits spending, realize that awareness limits spending. If you know the value of your money and know how much you should spend and what you should be trying to do with it, you’re less likely to make meaningless impulse purchases (you should still make meaningful impulse purchases!).
The connection between paper and bank account numbers is a thing of the past. In today’s world and the modern economy, awareness and comfort with numbers and spending patterns is the real way to become financially confident. Sorry internet, carrying paper just won’t do it for the modern mogul generation.