If I asked you to accurately draw a one dollar bill without looking at one, how close do you think you’d come to the real deal? About 20 years ago, I probably would have drawn a pretty accurate picture – for two reasons mainly: (1) cash was a more common form of payment back then, and (2) I was 10 years old then and knew of nothing other than cash. Today, I would probably fail miserably at drafting up a dollar bill, much like the rest of you.
Cash isn’t hardly used anymore. It’s bulky, it’s a slow form of payment, and it’s fairly easy to lose (especially those blasted coins that always fall out of my pocket!). While it seems like cash is becoming about as popular as Urkel’s accordion, there still are quite a few untold benefits of cash!
9 Untold Benefits of Cash
Have you ever wondered about the untold benefits of cash? In my mind, there are two categories of this cash benefit. There’s:
- The benefit of stock-piling cash, and
- The benefit of using cash
In other words, there is a benefit in having cash in the bank (or under your mattress I guess – wherever you like to keep your cash) and then there are additional advantages to actually carrying some of that cash around with and using it for purchases. Sharpen your pencils and get out your notebook – here we go!
Benefits of Stock-Piling Cash
There are quite a few “sophisticated” folks that believe putting cash in the bank is like throwing money down the toilet. In their minds, money is continually depreciating (because of inflation) and should be used either immediately in the present or even for future payments (ie. with a car payments or house payments). I used to be on their side on this one, but after living life for a while and learning a few things, I now find myself on the complete opposite side of the fence. Everyone should have a decent stack of cash for the following reasons:
One of the best untold benefits of cash is the fact that it increases your security, and not just security in your personal finances, but a security about yourself as well. Let me explain this with a scenario that I see all the time at the office. Picture two men, both in the same position, each of them earning around $75,000 a year.
Man #1: Owns a modest house and a modest car, but owns everything outright and has absolutely no payments. He also has $20,000 in the bank just in case of an emergency.
Man #2: Owns a house on the lake, a 40′ boat, and a recent-model Mercedes, but makes huge payments each month for them. Often times, he has less than $1,000 in the bank.
Which of these men is more secure about himself? In my opinion, Man #2 is incredibly flashy and might impress a few people with his stuff, but would he ever be willing to talk about his finances with these people? No way! He’d hide it till the day he dies, desperately hoping that no one knew what kind of debt he was actually in. The most secure person in this example is Man #1. He doesn’t look like he has a bunch of wealth, but he’s going to be the one that displays much more confidence in every situation. His life is real, inside and out, and it makes him all that much more secure about who he is and what he stands for.
2) Allows You to Respond, Not React
You know what happens to people when their car breaks down and they only have $100 in their bank account? They panic. They know that they can’t afford the repairs, but they need to find the money in a hurry because they can’t do without their car. This is when people do stupid stuff like pull money out of their 401k, take out a personal loan, or even worse – they charge the repair on their credit card (to be paid….at a later, unknown date).
Stocking up $10,000 of cash in the bank allows you to respond instead of react. Instead of being consumed with scrounging up the money to make the repair, you instead start thinking about what needs to be done to fix the core problem, and who can do it for the most inexpensive price possible.
Most people are so busy figuring out how to make $50 with their credit card purchases that they never realize how much money they could save if they did something super simple, like socking away some cash. One of the biggest untold benefits of cash is that it can save you hundreds (maybe even thousands) of dollars in insurance costs each year.
Back when I had no money, I selected very low deductible insurance policies for my car, my home, and my health. The reasoning was simple. If I ever had an accident where I needed to fix something, I needed the most possible money from the insurance company because I didn’t have any! Do you know what this did to my monthly payment? It made it way more massive than it had to be!
If you hardly ever have accidents and are fairly healthy AND have a stack of cash, then you don’t need a low insurance deductible. If something bad happens (which it rarely does when you actually have the money), then you can simply pay for it out of pocket! This simple action has saved me thousands of dollars and it can do the same for you too. But, you first need to pile up that cash.
4) Earn Money in Bank Interest
Often times, I write an article and mention in passing that I earn 3% interest in my checking account. I’m always amazed how many people comment and either call me a liar or insist that I must have made a typo. Nope. No typo here. All you have to do is search, “best credit union checking account rates” and you’ll find plenty of credit unions that pay out an amazing interest rate, all for just parking your money in their building.
Benefits of Cash Purchases
The untold benefits of cash don’t stop with having a pile of cash. There are perks to actually using that cash as currency as well. While it’s not my favorite thing to do, I absolutely see advantages to it – five of them to be exact.
Computer hackers are everywhere.Unfortunately for all of us, they choose not to do good with their expert intelligence. Instead, they hack into store like Home Depot, Target, and Michaels to steal your identity, and ultimately your money.
This untold benefit of cash shouldn’t surprise you. If you paid with cash at Target, Home Depot, and Michaels, then guess what? Your identity and your money is still safe. It maybe have taken you an extra 30 seconds to check out, but it might just be worth it don’t you think?
6) Save Money in Interest
Because people simply want stuff and want it right now, they are willing to spend money that they haven’t even earned yet. That’s right, by purchasing items with your store card, credit card, or through a special financing program, you are actually spending money that you’ll earn in a couple weeks, months, or even years from now. And, to have the luxury of doing this, you’re often required to pay interest on the money that you borrow. It’s not uncommon for people to pay interest on their furniture, their washing machines, or even their clothing!
If, instead of financing your purchases, you actually wait until you have the cash, then you’ll never pay a single cent in interest payments for the rest of your life. Some might call this ludicrous or unsophisticated – I call it responsible.
Until I read “The Power of Habit” by Charles Duhigg, I never really realized how much corporations knew about us. Within the book, Charles describes the job of a man that worked for Target. His sole responsibility in his role was to figure out what people wanted to buy even before they bought it. As it turns out, he created his algorithm brilliantly and could quite accurately predict many life events of Target’s customers, including pregnancy (sometimes even before the expectant mother knew)!
By using our credit cards and swiping our phones, we are freely giving our information away to an unlimited number of companies. With that information, they form relevant ads and serve them up to us in the form of emails, flyers, and even as banners on the sides of our favorite websites! But, if you use cash instead, they have a much more difficult time obtaining your information, and therefore have an even more difficult time advertising to us. One of the best untold benefits of cash for me is that with fewer ads in front of my face, the lest tempted I am to buy stuff, which of course saves me money in the long-term.
8) Spend Less
People tend to think twice about buying something when they actually have to fork over the cash. There are many studies that have actually proven that people spend 12%-18% less when they unfold their 20-dollar bills instead of just swiping that credit card. The reasoning behind this is fairly simple – it hurts.
When you plan to swipe a credit card, rarely do you even listen to the amount that’s read off to you by the cashier. You’re just ready to swipe, grab your purchase, and head out the door. There is absolutely no emotion to that plastic purchase.
When there’s cash involved though, you might only have $100 to your name and it resides in your wallet. If that item you want to purchase is $90, you realize that you’ll barely have anything left when you walk out that door!
One of the beautiful benefits of cash? You’ll be worth more at the end of the month.
As Rob Wile puts it, “Student debt has turned millennials into carless, homeless, basement dwellers who can’t borrow.”
The ease of acquiring student loans was supposed to propel millennials into better jobs with high salaries and ultimately take the nation along with them into their economic success. Unfortunately, student loans have actually stiffled their growth because many of them have simply accumulated too much debt. They now have very little cash flow and are at too great a risk to even qualify for their own home loans.
In short, debt is slaying many young Americans.
Instead of taking on a bunch of debt to acquire a degree, why not work your tail off during school and pay for it with cash like everyone used to do? By taking on little to no debt, students could be more picky about their first job out of college, which would then allow them to thrive in the area that they love, instead of surviving in a job that enables them to pay the bills.
Living a cash-only life might make you feel limited initially, but it is the absolute best way to propel yourself forward into an amazing, financially secure future.
What do you think about these untold benefits of cash?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.