Given the first six years of my adult life, my relationship to cash and personal finance is somewhat interesting. Straight out of college, I got a job working on Dave Ramsey’s web team. For those unfamiliar, the radio host and author espouses a back-to-basics approach to finances. The cornerstones of his message are avoiding debt in all its forms, saving up for emergencies and large purchases, and utilizing cash for day-to-day expenses. As I favor myself a common-sense person, I’ve been using this system since I was twenty-two. In specific, I’ve used the “envelope system,” literally driving to an ATM each payday to withdraw the cash needed for food, entertainment, and other expenses for the next couple of weeks. I have to say, thus far it has worked great for me and kept me from a number of monetary pitfalls.
That said, I was intrigued when I first spotted The End of Money by David Wolman. I confess that as much as I love learning and being challenged, sometimes I do avoid a book if I think the author’s biases and intent seem too obvious. Why take the time if I already know what they’re going to say, right? Indeed I have my own biases against credit card companies, banks, and their influence on our culture. That said, I finally consumed this book in audio form on a recent road trip, and it has given me some things to think about.
Though the initial chapter meanders through more of a narrative style, explaining how the author came to be interested in the topic at hand (and possible ties between the Apocalypse and a cashless society), the pace soon picks up with a history of money tracing back to its earliest appearances in civilization. While interesting to a fact-collector such as myself, the truly compelling portions come thereafter. I will only hit the highlights and sections which I found of particular interest.
Wolman points out that the notion of cash is so ingrained in modern Western culture that we are often blind to its costs. It is always assumed to be the cheapest way to do business for both consumer and merchant, but this can be far from true. First, there are the vast sums of government money required to mint, distribute, and monitor currency. The exact figures escape me, but I believe them to be in the billions per year. (As a fiscal conservative, anything that can be done to shrink the federal budget is a plus in my book.) Then there is the infrastructure required to shuffle money around, from bank vaults to armored cars to guards who attend it each step of the way. Lastly, there is the real cost of time involved in transacting with cash; if time really is money, the labor involved in businesses making change and keeping denominations on-site is more than negligible. True there are card processing fees (usually three percent) for vendors to account for, but in many cases the costs of manpower are higher. Could the efficiencies of moving to more of a cashless society actually spur economic growth? I think there are too many variables to say, but it’s a thought worth entertaining.
Further, there is often a psychological comfort to having cash in hand, as if it is the safest form of money. True, having a tangible representation may be one step above digits stored on a remote server, but there is nothing intrinsically valuable about coins, and much less bills. The reality is that we already live in a cashless society, passing around tokens of little worth, and we have since leaving the gold standard. There is nothing but good faith backing the dollar sign, whether it is on a screen or a piece of paper. As one driven by logic, I admit that this fact is compelling given the potential efficiencies mentioned above. There is nothing inherently safer about hard currency, and in fact the risk of carrying it may be greater in some cases with regard to loss and personal safety.
The last section which I found compelling deals with the argument that cash is actually a system which keeps the poor impoverished. It took quite a bit of explaining, but in the end I can see where the author is coming from. To those of us in developed nations, swinging by the ATM is an inconvenience, but to those without access to transportation or infrastructure, dealing in cash bears a much higher cost. Wolman states that the average cost of a bank visit for a consumer is around one dollar, considering time, effort, and other factors. To one who earns only a few dollars a day, this is a true hardship. In economies where electronic money transfer has been put into the hands of many via cell phone banking, growth has always followed. Saving money electronically is easier than hoarding bills which are always at the risk of being stolen. People seem able to lift themselves out of poverty more easily when the efficiency of electronic payment enters the picture. From this perspective, there may even be a philanthropic element to phasing out cash.
All of these points have led me to try an experiment. For the next month, I am going to try dealing in cash as little as possible. For a technology professional like myself, this may seem a little late in coming, but my method has worked well to this point, so I saw no need to mess with it. Given new information, however, I’m willing to take a second look. (This in no way changes my decision to live below my means and avoid credit at all costs, however.) I will be utilizing Mint.com to budget, track, and categorize spending, with the end goal being that I stick to my budget as well as a cash-based system. Honestly, I’m skeptical after years of having the psychological advantage of seeing bills dwindle from envelopes as the month wore on, but should the experiment succeed, I see no reason to continue making trips to the ATM. I may even gain more insight by having financial information to dig into in digital form. Ultimately, however, I am a pragmatist, and I will stick with whatever works best, regardless of the insights provided by the book.
Overall, David Wolman delivers an interesting and thought-provoking read on the nature of cash and its role in our society. Though it is thick on history and may meander from the central topic at times, the information he presents is clear and generally without bias, even if his personal worldview does poke through in a few editorial remarks. I say it’s worth a read for anyone loosely interested in economics or cultural trends.
The End of Money is available via audio book from the Nashville Public Library and multiple formats on Amazon.com.