When Money Was Real

by Alex on January 30, 2012

Do you still carry cash?

When I was young, money was real.

I couldn’t get a ham and cheese sandwich for a nickel or anything like that, but I could use the 2 dollars I’d been saving to buy a pack of cards from the game shop or my favorite candy for 50 cents. When my dad took us kids out to eat, his wallet held $20s, $10s, and $5s for him to use in exchange for the delicious food.

And when my mom exchanged a check for groceries it was always taken. Businesses knew a bank stood behind that check, and each bank held a vault full of real dollar bills to pay the check with.

But that isn’t the world we live in anymore.

Very few of us actually use real money. Everything we spend is digital.

If you use a bank, a debit card, or anything similar your money is no more than numbers on a spreadsheet – we don’t even use ink anymore.

When I buy food for my family, instead of cash, the restaurant gets a card that takes numbers off of my spreadsheet and transfers it to theirs. It isn’t real, but it’s how we do business.

What Happened?

Why has money gone digital? The answer is multi-faceted and complex but the simple version boils down to three reasons:

  1. Digital money is cheaper. Having someone count out every dollar in the bank is more expensive than having a computer keep track of a large spreadsheet. Fewer employees, fewer mistakes, and significantly less overhead. Banks are happy.
  2. Digital money is convenient. I log into a website and know immediately how much money I have – no more digging up a shoebox and counting what’s inside. Plus, when I want to buy something, I pull out a card that does all the work for me. No more counting change, knowing the right denomination of bill to use, etc. I am happy.
  3. It makes us spend more. Real money makes me pause when I see my wallet start to shrink. Do I really want to spend this money? It also stops me from spending money I don’t have. An empty wallet means I can’t buy stuff. Digital money takes away those limitations, keeping me ignorant of overspending. Banks and businesses are very happy.

Cheaper, convenience, and overspending are the driving forces in the money shift. Fewer people are using cash than ever and spending is skyrocketing – even during a so called recession.

Find A Balance

Going from real money to digital money isn’t a big deal.  Like anything, there are benefits and disadvantages to both. As someone who uses money, it’s your responsibility to both be aware of the change and to find the right balance between digital and real money.

Why a balance? Because real cash helps you put a reign on spending while digital cash simplifies money management.  You need both to grow wealth and thrive financially.

Do you use real money or have you gone completely digital?

When was the last time you wrote a check?

Alex Humphrey is a personal finance writer and coach at EntrepreLife a personal finance blog that teaches easy ways to dominate money by dropping debt, investing well, and saving for the things you love to do. When he’s not blogging he leads a youth group, spends time with his wife, and figures out new ways to teach people personal finances. You can follow him on Twitter and Facebook and subscribe to the EntrepreLife mailing list.

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{ 14 comments… read them below or add one }

Norman January 30, 2012 at 2:07 pm

I use a hybrid approach. I still get cash from an ATM and I carry cash around for my day-to-day purchases, buying groceries, gas, eating out, etc. Otherwise, everything else is done digital. All my bills are withdrawn automatically from my checking account. I only write a couple of checks a month by using online billpay. I use cash for my everyday purchases for the reasons you talked about. It helps me keep a handle on my spending because I have a harder time letting go of cash. Oh, and by the way, I remember penny candy that my brother and I would purchase from finding returnable pop bottles. Those were the days of real money!

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Alex January 30, 2012 at 3:59 pm

Ha! I vaguely remember penny candies, but I think they were like 10 cents when I was a kid. lol.

Sounds like you’ve got a good system going. It’s very similar to mine – digital bills, cash for day-to-day. Like you, it helps me keep a handle on spending (I’m a spender!).

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Nicole C. January 30, 2012 at 2:59 pm

I’ve often had this same thought in my mind, that technically money is only worth what the powers that be say it is. In other words, if the entire world agreed that it money was worthless — coins and bills, we’d all be back to barter system. I recently decided to start teaching my 13 year old about debit vs. credit cards and the whole banking, payroll process. I definitely want her to learn early from my financial mistakes and to steer clear of them. Thanks for this informative article!

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Nicole C. January 30, 2012 at 3:02 pm

I also meant to add that I use both — cash and debit card. It’s definitely more of an emotional loss when cash is paid out to purchase something. It hits deep. Whereas, with a piece of plastic it seems easier. It’s still tied to ones checking account, yet it feels a little empowering at the same time. Weird.

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Alex January 30, 2012 at 4:01 pm

Crazy how separated we are from those plastic cards. Maybe we’ve just been trained that using a debit card isn’t the same as using money.

How many movies show a kid or an adult parting with their last dollar. There is pain in that person’s eyes as they lose the little bit that they have. It’s a tragedy, really.

Put that up against a checking account that’s overdrafting or being heavily in debt. In the movies, it’s more a joke than anything else. “Oh look, my account only has 0.25 cents in it! hahah!”. There’s no pain, no regret. It’s just a pixel on a screen.

Great comments! And good luck training your daughter. You’re putting her ahead of most of her peers!

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krantcents January 30, 2012 at 7:40 pm

I bank online and they pay my bills. No check right! I use mostly credit cards. The only time I write checks is when I need to pay someone without using a credit card.

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Alex January 31, 2012 at 8:26 am

I’m the same way with checks. The last time I wrote one was when I couldn’t get online to pay a bill! lol

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dojo January 31, 2012 at 7:36 am

Excellent points. I still use cash for many transactions and, as you said, I spend the money harder than from paypal or my bank account. It’s not a ‘number’ for me, it’s REAL.

Still we can’t oppose progress, so we have to learn how to deal with this. Get more disciplined and start viewing our ‘internet’ money as real too. Because it is, even if we don’t feel it like this 😉

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Alex January 31, 2012 at 8:30 am

I think there is a balance that can be found between digital and real money. Progress can be embraced without letting go of the things that keep spending in check.

Digital money is the greatest convenience of the 21st century, but without real money it’s sending us massively into debt (both as a nation and individuals). Finding a way to balance the use of digital money and real money seems to be the necessary check to keep a disciplined life in the new world.

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Alex January 31, 2012 at 8:25 am

I’ve heard of square, but only recently got a smartphone. I’ve considered downloading it to use for my business.

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Thomas - Ways to Invest Money January 31, 2012 at 10:16 am

I completely agree with the growing up using “real” money. It wasn’t that things were just cheaper but you only spent what you had on you. I still believe in carry a few dollars over the weekends to make sure I only spend a certain amount. All to often when you use credit and debit cards you just over spend of course this works out in everyone’s favor except yours.

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Alex Humphrey February 1, 2012 at 9:58 am

That’s my experience as well. I don’t even use my debit card for anything except gas and bill for just that reason! I save A LOT of money and still do all the things I love.

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Vanessa February 1, 2012 at 1:09 am

I agree with all your good words about digital money; there’s no doubt that they are way much better than hard cash. However, I feel more secure seeing bills and coins with me.

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Alex Humphrey February 1, 2012 at 9:58 am

Me too 😀

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