Does spending in cash help you budget?


Does spending in cash really help people budget – or have you got a better trick up your sleeve? asks SIMON LAMBERT

How often do you use cash and how much have you got in your wallet right now?

I rarely spend cash nowadays and often have none on me, although at the moment I’ve got £50 tucked into my wallet.

But that’s a sign of how little I use physical money: it’s been in there since 29th December when a friend wanted to pay cash for a shared family lunch and I took his notes and paid the bill on my card.

This is also a classic example of how my attempts to use cash to budget often end up being a false economy.

Cash use is on the up, according to Nationwide Building Society, which says people are increasinbgly using it to budget in the cost of living crisis

At the time of taking those nice crisp twenties and fivers off him, it made sense: ‘I have no cash, it’s always good to have a bit, I may need some in the next few days etc.’

Yet, what’s happened is my post-Christmas bank balance now has a £50 bigger hole in it and a fortnight later I’ve still got fifty quid untouched in notes that will probably sit in my wallet for ages.

This example sprang to mind in a conversation about cash with some of the This is Money team after a report from Nationwide arrived on the topic.

Britain’s biggest building society said that cash use was on the up – bucking years of decline – with people using it to budget in the cost of living crunch.

Nationwide said it had seen cash usage increase for the first time in 13 years, with 30.2million cash withdrawals from its machines last year – up 19 per cent from 25.5million in 2021.

Last year’s figure is still down substantially on the 44.5million seen pre-pandemic in 2019, but represents a substantial bounce back from the twin Covid-hit years of 2020 and 2021.

Otto Benz, Nationwide’s director of payments, said: ‘For the first time in years we are seeing a natural rise in cash withdrawals as people return to using cash to help avoid getting into debt from the rising cost of living.’

But in a world where card payments are increasingly the norm, does using cash to budget still work for most of us?

I can see how it would for those really struggling to get by, who might take out a fixed sum from a cash machine and then try to only spend to that limit.

Yet, for the broader majority, who may be feeling the pinch but aren’t having to live on an absolute shoestring, I can see this being tougher in practice.

A reasonable chunk of my weekly spending isn’t feasible or even possible in cash: ranging from contactless tapping in for trains, to our online weekly grocery shop, and the office canteen and multiple other places that now only accept cards.

So much money leaks out digitally that trying to control my budget with cold hard cash seems pointless.

But am I just being lazy? Are others using cash and budgeting better than me?

Not if my small (and not representative) sample of This is Money journalists is anything to go by, all said they rarely use cash and any attempts to do so to budget often fall flat due to unintended consequences.

The problem of breaking a note and then seeing the coins you get in change seemingly disappear also popped uo more than once. 

I did track down one cash fan though, our former deputy editor Lee Boyce – now editor of our sister newspaper publication Money Mail – who has long been an advocate of not only spending on debit cards.

Lee says he does still regularly use cash and one thing he does is take out £100 on payday as a bit of ‘fun float money’ which he uses for ‘the little pleasures: pub, magazines, lunch, etc – it helps me keep on top of what I’m spending better on those kind of purchases’.

On a recent trip to the west coast of Ireland he also largely used cash and said he not only finds cash helps him budget on holidays but that he likes using it with his daughter and teaching her about different currencies.

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That latter example is probably true of many of us, who will be far more likely to spend cash on holiday than at home, unsure if we can rely on cards in unfamiliar surroundings.

I also find myself needing to remember to get some cash before heading to more rural parts of the UK, where I regularly get tripped up with my London-centric ‘stuff is open all hours and I can pay by card everywhere’ laissez-faire attitude.

As for everyday life though, I can’t see myself joining the switch back to more cash usage.

I’m no advocate of a cashless society – it’s worth remembering central banks, governments, banks and businesses love digital spending. as they can track it and there is less friction so we are encouraged to spend more – but ditching the debt card just doesn’t seem practical.

What I have considered though is the modern-day equivalent of using cash to budget: getting an extra current account to pay a fixed amount for spending into each month.

I could see this both creating a bit more friction and giving me a much better oversight of where my money is going.

If you’ve done this, have any similar ideas, or have switched back to cash to budget, tell us in the comments below or let me know by email at editor@thisismoney.co.uk with Cash Budgeting at the start of the subject line. We will publish the best ideas.



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