Living in a Cashless World

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As folding money disappears, how can we keep our spending in check?

How much cash is in your wallet?
A few twenties?
A wrinkled old five?
Or maybe, like many people, you don’t carry cash at all?

In a 2016 Gallup poll, only 24 percent of people reported using cash to pay for most or all of their purchases—12 percent fewer than five years prior. For the youngest Americans surveyed, the number was even lower: just 21 percent. Instead, these consumers use debit cards, credit cards and mobile payment apps, relying on them so heavily it has become possible to imagine a world without cash.

“Using less cash enables us to do more with our money,” says Pierre P. Habis, president of PurePoint® Financial, whose research shows that people who self-identified as “committed savers” are more likely to manage their savings online and are more likely to set up direct deposits to save regularly.

PurePoint, which focuses exclusively on savings, combining online banking with brick-and-mortar financial centers, exists because of the increasingly digital nature of finance. Habis thinks that’s a good thing for consumers across the country who want the convenience of being able to bank when and where they want. As Americans become more accustomed to thinking of their money as digital, Habis believes they will be more inclined to move more of it into a savings account.

“I think the digitalization of it all is only positive, so long as people use those digital channels wisely and to their advantage,” he says, though he acknowledges there are some who might see drawbacks. Studies have shown, for instance, that those who don’t use cash tend to spend more freely.

“People feel more pain when they have to part with cash,” says Greg McBride, chief financial analyst at financial services company Bankrate. “They don’t view spending with plastic the same way, and so there’s a greater tendency to overspend.”

It’s a phenomenon that Marie Thomasson, a Los Angeles-based financial planner who works mostly with Millennials, has seen firsthand. Her clients pay for cabs or ride shares, order food and send each other money, all with their smartphones, and never have to stop at an ATM. It’s easy—almost too easy—to spend.

“You can bankrupt yourself with all this convenience,” Thomasson says.

To counter the temptation to overspend, Thomasson recommends that her clients open a savings account that is entirely separate from their checking account, in order to make it harder to spend the money saved inside.

“It needs to be a little bit of a pain point to get the money out,” she says, “so that you’re conscientious about why you’re taking it out and what you’re doing with it.”

In choosing a new home for consumers’ savings, Thomasson preaches simplicity. She recommends institutions that focus on savings, rather than unnecessary bells and whistles.

“You want something that’s just a savings account, no more, no less,” she says. “Find the highest savings rate you can find.”

“We wanted to make saving as easy as possible,” Habis says. “That was a guiding principle behind how we built PurePoint.”

And that, McBride believes, is the chief advantage of consumers’ decreased reliance on cash. While spending money is easier than ever, saving it has gotten easier too.

“Going cashless facilitates more regular savings,” he says, “whether it’s direct deposit from the paycheck or moving money directly over from your checking account at month’s end.”

Will cash ever disappear completely? McBride doesn’t think so. As convenient as smartphones can be, there’s nothing faster than pulling a dollar from your wallet, which means that cash remains fundamental to the on-the-ground economy.

“Tipping the bellman is a lot easier,” McBride says, “when you have some cash in your pocket.”

By WSJ. Custom Studios.

WSJ. Custom Studios is a unit of The Wall Street Journal advertising department. The Wall Street Journal news organization was not involved in the creation of this content.

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