I know most people think that money is just money, but I'm here to tell you that there is an enormous difference between paying for things with cash and with other forms of payment - including credit/debit cards, checks, or your phone.
Behavioral scientists have done probably hundreds of experiments over the years that clearly prove we have an emotional connection with actual cash that we don't have with other forms of payment. Here are a couple that I remember hearing about:
- Researchers put cases of soda in college dorm fridges. Alongside the cases of soda, they put paper plates of dollar bills that represented the approximate value of the soda. Then they waited a week and came back to check. The sodas - all gone. Every last one of them. The dollar bills - nearly all untouched. The students viewed the pilfering of sodas as fairly benign, but they clearly recognized that taking money - even a dollar, was a strong cultural taboo.
- In another experiment, subjects were given an easy one-page questionnaire to fill out. Half were paid the grand total of .12 cents in actual cash money, while the other half were given a voucher for .25 cents that they could redeem for a candy bar. Even though the second half was paid the equivalent of twice as much money, the first group spent an average of 10% more time completing the survey. Even though the payoff was such a slight amount of money, it still was recognized as being more valuable,
Interestingly enough, mere mortals like us are not the only ones who have access to this research. You can bet that every corporation with a product to sell, knows this research backwards and forwards. They know that you will spend significantly more money if you use a non-cash form of payment. And they leverage that in any way they can.
There were actually commercials on a few years ago that were blatantly anti-cash. They would show dancing water, rotating flowers, and tons of happy people moving in unison to happy music. Then everything would come to a screeching halt whenever someone stepped up to the cash register with cash in hand, like it was a bad thing to show up with in God We Trust greenback dollars. Then someone would whip out a piece of plastic and boom, all the music would start up and all was right with the world. That was about as subtle as a ton of bricks.
Here's WHY they don't want you to pay with cash:
- You are much more price-conscious when spending cash. It's so dang easy to just swipe that little plastic square and not think about the price. There's no natural stopping point with a card like there is with cash. Plastic just feels unlimited.
- You genuinely might not have enough cash with you. Cash is a finite resource - when it's gone, it's gone. No retailer wants to lose a $60 sale because you only have $58 in your hot little hand.
- Cash brings you back to the good old-fashioned state of "can't afford it". It just feels more "real" when you are handing over a chunk of cash vs. an electronic transaction. Try doing this with grocery shopping once in a while. You become VERY aware of the prices when you are facing the embarassment of having to put items back at the register.
I used this on my son a while back - the one that just got married. He had a gym membership that he hadn't used in quite a while. It was set up on automatic payments (here's a link to why THOSE are such a bad idea!) so he didn't really pay much attention to it. So I told him to imagine going into that gym every month, reaching into his wallet and pulling out a nice, crisp $20 bill and handing it over to the muscle-bound guy at the front desk. Then I told him to imagine just turning around and walking right back out of there without even getting the exercise he was paying for. That was the reality of it, but he couldn't see that until he put the emotion of cash into the picture. He called them up and quit the next day!
That's why those envelope spending plans really work. The ones where you put all your money for the month into different budget envelopes. It's a lot like Weight Watchers - you only get so many points and then you're DONE. No wiggle room - you spend money here, you have to take it from there. Lawyers call that a bright white line - the clear difference between right and wrong.
That's why, when I'm really broke, or when my spending is particularly out of control, I immediately switch to cash. It's always a big eye-opener for me and I usually get my finances back under control at that point. How often do you go on a strict cash basis? Probably not often enough...
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Photo credit: Image courtesy of Janoon028 / FreeDigitalPhotos.net.