Almost every day we make some kind of payment. Today’s technology makes it possible to make those payments in a number of ways. If we take a look at the history of money (see this link for a cute movie on the subject) we see that what we today call payments in cash, have been around for quite a while -actually since man realized that trading only with goods and commodities, isn’t always that comfortable.
In Denmark, where I grew up, they have in recent years began to talk about the possibility to getting rid of cash payments altogether and move over to electronic payments only. Some say that cash is outdated and is something we should live without. In my opinion, we should deal with fax machines and check books first, but that’s a whole other discussion 🙂 When it comes to cash, I actually still see benefits when it comes to financial management:
Paying with cash makes the shopping experience more real and less abstract. When we actually have the money in our hands, it helps us connect more easily to it as well as to the product and to the price we are about to pay for it. Various studies has shown that we are more aware of our purchases when the payment is made in cash.
Payment with cash does not involve any fees or interest rates and is therefore a more money smart kind of payment. There are even places that gives price reductions when paying with cash. For example, my local supermarket there is a 3% discount on every purchase over Nis 150 when the payment is made in cash.
Of course cash also have its down sides and also they are noteworthy:
Payment by cash is not registered anywhere and is therefore it is difficult to have control over, especially when we try to control and monitor our spending. We (or me at least) tend to withdraw money from the ATM only to find out later that we don’t exactly know afterwards where they went exactly. The money in your pockets becomes a form of “free” money and small sums like these can easily grow into a substantial amount in no time. There are many ways to try and reduce such purchases. A good tip is writing those payments down so that you can be in control of them.
Payment by cash means always to have to walk around with cash on you. It is not always convenient and is not always the safest thing because of the possibility of theft or loss.
Overall, I think cash is here to stay, at least for now, and our job is to find the best way to use all the options that we have in our possession while, at the same time, remaining financially smart.