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Will the cost of living crisis mean we all go back to cash?

Will the cost of living crisis mean we all go back to cash?

As the writer Mark Twain supposedly said, “Reports of my death are greatly exaggerated.” Could 2022 be the year that cash says the same thing?

Many clients reading this will remember the traditional method of budgeting used by their parents or grandparents: a pot for gas, a pot for electricity, one for food, another for clothes. Maybe even one for holidays.

Others will remember the ‘Christmas Club’ run by the local shop. The idea was simple, you put a little bit away each week and when Christmas came, the money was there.

Then, of course, people stopped getting paid in cash. Wages and salaries were transferred into your bank account. We started paying with cards, tapping our pin in and then going contactless. Then we started banking on our phones…

‘Cash is dying out,’ said the pundits. And the evidence was there for all to see.

Lloyds Bank recently reported that 90% of payments for eating out are now contactless with the number having risen significantly since the pandemic and the lifting of the limit on contactless payments. The proportion is similar at the supermarket checkout. Surely it was only a matter of time before we followed Sweden, a country that expects to be a cashless society by next year.

Except that cash is making a comeback. The Post Office recently reported that its branches handled a record £801m in cash withdrawals in August, up 8% on the previous month and 20% on the figure from July of last year. The total amount of cash deposited and withdrawn at over £3.3bn was the highest in the Post Office’s 360 year history; clear evidence that local businesses are being paid in cash.

The strains imposed by the cost of living crisis means that cash is anything but ‘dead’ with people turning to it to help with their budgeting.

The Post Office said: “We are seeing more and more people relying on cash as a tried and trusted way to manage a budget.”

You might question why? After all, there are plenty of apps on your phone that will allow you to create digital ‘pots’ for gas, electricity, clothes and even Christmas.

Perhaps the answer lies in another of your grandmother’s sayings: “If you can get credit it’s free. If you pay by cash it’s very expensive.”

There’s a clear psychological element to using cash: if we tap our card, we know it’s not free but it’s very definitely not the same as counting out the money and handing it over.

‘Look after the pennies and the pounds will take care of themselves’ as the old saying has it. Our gas and electricity bills may no longer be in pennies but plenty of us are going back to a budgeting method that has stood the test of time and that our grandmothers would approve of.



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