Does Spending Cash Really Save Money?

anotheruser

Interested to see what people's views are on the following statement:

"I draw £250 out of my bank every month and use it to buy food and groceries. Seeing and spending the cash means I am more aware of what I am spending and have managed to save a significant amount spending in supermarkets like this"

Thanks

atolaas

I think it does. I don't draw a month's worth of grocery money out in one go...but I do for each weekly shop instead.

grumbler

Not for me.
I don't buy anything that I don't need.
If I used cash and ran out of it, I'd buy something that I needed regardless.

vouch0r

it all comes down to what works best for you.

personally id rather earn interest on my money in a top interest CA and not risk loosing it or being a victim of theft..

AlwaysLearnin

It depends on your personality I suppose, i.e. self restraint.

There was an experiment in the recent 'Men who made us spend' series where they set up a blind auction with two groups for the same thing. One group had to pay cash if they won the auction, and the other could pay with a credit card. From memory, the bids by the credit card group were on average 4x higher. This appears to demonstrate the higher emotional attachment to cash as opposed to the detatchment that a credit card can offer.

c0113tt3

In the current recession (with good retail discounting and low interest rates spending does actually save you money. Retail sales reductions are bigger than ever, for example 50 to even 70% off in certain areas, usually branded / luxury items, one of the latest being Radley. When the recession finally ends, demand for such goods will increase, and prices will remain steady, with only low level discounts 20 or 30% at the most. There are many other areas that this is happening including restaurants, and again when demand increases they will discount very little. Balance such a saving against what you would be paying in a few years time when the demand increases, much lower discounts against the interest you would have earned if you had kept the cash and bought such an item in the future, then yes you do save money by spending now. However if you never wanted such items and know that you would never want them in the future (even as presents) then of course you would be just wasting money, depends on the individual.

Vortigern

My preference is to leave the cash in the bank earning interest, and spend on the credit card earning cashback. I'm not 'tempted' to overspend; I'm nowhere near my credit limit and the CC is paid off in full every month.

Card transactions in major supermarkets are usually quicker than cash too.

Mr_Goodkat

I find spending on cash back paying credit cards the best as it obviously earns me cash back but I also have a record of just about everything I have bought so can review my spending habits.


I find cash a lot easier to fritter away (especially on unhealthy stuff) whereas a card payment is bigger decision.

Goldiegirl

Vortigern wrote: »

My preference is to leave the cash in the bank earning interest, and spend on the credit card earning cashback. I'm not 'tempted' to overspend; I'm nowhere near my credit limit and the CC is paid off in full every month.

Card transactions in major supermarkets are usually quicker than cash too.

That's how I do things as well. I know some people like to get all their money out at the start of the month and put it in purses and envelopes, but I think there'd be a danger of drawing out too much. I can see exactly where I am with card transactions - much easy IMO

camperdown9

I guess everyone is different. If I have cash I will spend it and don't tend to keep a record of what I have spent it on. It just goes.

If I use my debit or credit card I keep the receipts and then record these on an excel doc so I always know what I have got left to spend.

phona

Let's say I go into a shop to buy something priced £10.
If I go in with a £10 note, I come out with the item and no money.
If I go in with a credit card, I come out with the item and the card I started with. Win win!
By decoupling the action of spending with the loss of money, a lot of people end up spending more - and hence end up in crazy credit card debt.

We think we're rational enough to spend on a card knowing full-well it'll have to be repaid, but actually humans are not typically rational. Making logical decisions takes too many resources for us to do it more than a handful of times a day.
Furthermore, we tend to believe the future will be better than the present ("I can't afford it now, but by the time the statement comes I'll have the money") and that we'll behave better in the future ("I'll treat myself today and next month I'll be really good and not spend anything"). The future comes, and it's not so rosy! This is also the reason gyms make so much money from January joiners.

There's a whole field of study called behavioural economics around this sort of idea.
(I've been reading psychology books of late so kinda got my geek on today)

----
Personally, I spend on cashback credit cards, as others have said. I don't like to carry much cash and don't believe I spend more than I need to; it's certainly affordable. Perhaps I'll try spending cash-only for a week or so.
I worked in a supermarket when I was 18 and was surprised how many people pay for over £100 of shopping in cash, but whatever works.