One of the biggest worries that have surfaced since PM Lee highlighted the need for Singapore to transit towards a cashless society is how the next generation of Singaporeans will understand the value of money.
Some people have argued that as we reduce the use of cash in our lives, perhaps even one day, eliminate it completely, our children will no longer be able to understand the true value of money.
The fear here is that “money” will appear as no more than a number in our bank accounts. And that our children will never know money as cash, similar to how previous generations have understood it.
But are these fears genuine? Should we worry about how the absence of cash will make future generation less sensitive to the value of money? Let’s explore the argument.
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Cashless Society = People Being Less Sensitive To The Value Of Money?
We all heard about what the proponents for cash would argue for.
“When we pay for an expensive meal using cash, it hurts and this makes us conscientious about how much we are spending.”
“When we run out of cash in our wallets, we understand the meaning of being broke because we overspend. This makes us mindful about what we are spending our money on.”
“When our parents give us $50 and we only spend $40. We save $10 and this teaches us the how and why we should save.”
All of these arguments are sound and relatable. Most adults today understand some of the important concepts of spending and saving because we were able to handle cash in our younger days. Even till today, there are some who refuses to use credit cards because they believe that paying through cashless methods will cause overspending.
But A Cashless Society Has Already Been Around Us For More Than A Decade
However, we believe the argument that a cashless society will somehow cause people to overspend is not well grounded.
To start off, there are tons of products and services around us that have already been paid through cashless methods for years.
An example will be public transport. Everyone, regardless of whether they are 6-year old or 86-year old is paying for their train and bus rides through a card. Coins are hardly ever used, unless a person forgets his card. But does that mean we are all “overspending” on public transport because we no longer use cash? Unlikely.
And what about the single biggest ticket item that most of us has bought…our homes. Though none of us are using cash to pay for our monthly mortgage, it will be a weak, not to mention strange, to be suggesting that we are somehow overspending on our homes because of the way we are servicing our monthly mortgage.
Does Using Cash Really Make You Spend Less?
A quick Google search on the topic will bring you thousands, maybe even millions of articles that suggest using cash helps people to spend less. We disagree that this is always true. Here’s why.
Theoretically speaking, it doesn’t. The use of cashless payment methods such as credit cards and bank apps actually helps people save money compared to using cash, with all things being equal.
Whether it’s through cashback you enjoy, discounts you receive or through higher interest because you kept your unused money in a savings account instead of your wallet, holding cash instead of keeping it in your savings account makes you worse off.
When you go one step deeper to think about this issue, you may even realise that holding cash is counter intuitive towards building more savings.
If we imagine a hypothetical situation where everyone was paid his or her salary in cash, rather than for it to be deposited into our savings account. Will we really end up saving more, or be spending more instead?
Convenience Is The Key
The key here is convenience. Whatever is most convenient will end up coming on top. If everyone is given their pay in cash, it will be very convenient for everyone to end up overspending, rather than to be saving more. If the only way to access our savings is to spend 1-hour queuing up at the bank branch to file in a form before a withdrawal is made, people are likely to automatically save more.
And this brings us to our final (and main) point.
As we move towards a cashless nation, we must build technology that not only enables us to spend in a convenient manner, but to also save and invest easily. Too much focus thus far have been put towards payment solution, which even led to gaming company Razer putting in their own proposal towards a national e-payment solution.
Eventually though, someone will do it. That’s almost a certainty because whoever creates a product that helps make it easy and fun for our next generation of children to save and invest is going to create an invaluable market.
We imagine apps where kids, upon receiving their weekly allowance, will immediately receive a notification asking them if they were like to set aside some money in a long-term designated savings account, and to receive simple gifts like free vouchers to reward them for hitting savings goals. This makes saving fun, rewarding and most importantly, convenient.
Our kids may no longer understand the importance of saving through the use of a piggy bank, or an annual trip down to the bank to deposit money like what we were taught when we were kids. But that doesn’t mean they are not going to learn how to be effective savers, or that they won’t understand the importance of savings. In fact, if technology is deployed in the right way, they might eventually be better savers than us today.
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