Paper, Plastic, and Metal

I love ice cream. It never gets old.

But as much as I crave some Ben and Jerry’s after a hard work week, it’s nothing compared to when I was a kid. When the familiar tune of the ice cream man found its way into the windows of our house, my heart rate skyrocketed. Like a dog, I would salivate at the sound of that song. It became all I could think about: Flintstone Push-ups or Dreamsicles, it didn’t matter.

Only two things mattered when the ice cream man came to my street:

1. Could I catch the truck before it turned the corner out of the neighborhood?
2. Did I have any money?

The ice cream man became my earliest memory of money. I emptied my piggybank over and over for it. I would count and recount my pennies, nickels and quarters to make sure I had the 95 cents or $1.25 I needed.

Of course, being 7 years old, I ran out of money often. When I could manage to talk my parents into giving me a dollar or a couple of quarters, I cherished them like they had some sort of supernatural power. The crispness, the cottony-paper smell, the unique greenish hue of a dollar bill was burned into my memory. The weight of a quarter, the smooth fat edge of a nickel, that familiar jingle of a pocketful of change became strongly associated with my desires.

The physical presence of money wore a deep neural path in my brain between what I wanted, and what it took to get it.

Most people have the same experience. Whether it’s baseball cards, Barbie dolls, ice cream, or something else kids go crazy about, you remember how money got you what you wanted. You remember how interesting cash felt, how mysterious and powerful this thing really was.

Fast forward to 30 years later. Now my mind is much less occupied with ice cream and Nintendo, and more with financial technology — it’s what I do for a living. My job is to get rid of cash: to implement electronic methods of financial exchange. Working in the industry has given me an insider perspective on the subject. The evolution of electronic payment instruments over the past hundred years has been revolutionary. Financial technology has changed the world in more ways than a blog post could ever attempt to describe.

The most interesting consequence, however, is the disappearance of the child fascinated with the physical presence of money. In those days, though our minds were immature and young, we understood, instinctually, the relationship between cash and what we wanted. When we had spent our last quarter, we literally felt the loss. Not because we read our account statement on a computer screen, but because we had empty pockets. There was no familiar jingle of change, no bills to rub together. We knew we had no money because, well, we had no money.

In those days the method of exchange was physical, real. More than a line on a computer screen, more than the swipe of a card. In the pursuit of convenience, we’ve exchanged cheap plastic cards for meaningful paper and metal, and lost the meaning of money in the process.

Of the many definitions of economics, my favorite is “the science related to the distribution of scarce resources.” In a system of monetary exchange where you replace money, a scarce resource, with a piece of plastic that always looks and feels the same, you lose the ability to monitor just how scarce your resources are.

I can hear the criticism now: “You’re an idiot! All I have to do is look at my account! Track my expenses! If you believe that you’re just stupid and don’t know how to handle money!”

Obviously a lot of people will disagree. The ubiquity of credit card commercials and electronic payment instruments is strong evidence of that fact. However, the number of studies on the behavioral economics of cash can’t be ignored. If you’ve got the time, you can read up here, here, or here.

Behavioral psychology, and the overwhelming profitability of credit card companies and firms in the financial technology sector prove my point.

As a result of all this, I use cash as often as possible. I’ve found exactly what the studies show: I spend less and have an easier time tracking how much money I really have. I consider my usage of cash a critical part of the financial progress I’ve made over the past couple of years.

That said, I don’t expect to convince anyone to throw away their plastic as a result of this post. I find myself in an interesting position. On one hand, I mourn for the kid that learned about the value and scarcity of money via 3 quarters and a Dreamsicle on a sunny afternoon. On the other hand, I make a living building the infrastructure that allows us to get rid of those quarters.

What I really want is to see my friends and family win with money. While money can’t buy you happiness, it can help you live the life of your dreams. It can send your children to college. It can help you handle emergencies with grace and dignity. It can help you retire. When you lose track of what you’re spending, you erode your ability to help other people and to have the things you want. When we remove cash from our lives, we hinder our ability to hold true to just how much money we really have.

Whether you use cash, cards, or something else, remember that your resources are limited. Just because your piggy bank has been replaced with numbers on a screen doesn’t mean the rules have changed since you were 7.

Because when the money’s gone, it’s gone all the same.