Is Gen Z Valuing Cash More than it Should Be?

No, it’s not that they are turning away from technology…

In a world increasingly dominated by digital transactions and the convenience of plastic, there is a remarkable shift happening among Gen Z, the tech-savvy and forward-thinking generation. Surprisingly, they have rediscovered the allure and practicality of cash, embracing it with fervor in a way that defies conventional wisdom. No, it’s not that they are turning away from technology; they’re using Apple Pay 44% more than other generations. But amid two years of soaring inflation that has ravaged household finances, Gen Z has turned to cash as a powerful budgeting tool, utilizing it more than any other generation. This unconventional perspective doesn’t challenge the notion that digital payments are the way of the future, but does offer a fresh and intriguing perspective on financial management.

70% of Gen Zers are using more cash vs last year

Data Credits: Credit Karma Online Survey

A Desire for Tangible Control

Gen Z, growing up in a digital age where transactions are often intangible, may find comfort and a sense of control in physically handling cash, allowing them to visually track their expenses and avoid the temptation of overspending.

Surprisingly, consumers tend to unleash their inner shopaholic when swiping their credit or debit cards, with studies indicating that they splurge up to a staggering 83% more compared to when they utilize the age-old method of exchanging cold, hard cash. This begs the question: Why does the simple act of physically relinquishing our own money provoke a moment of contemplation, while the abstract nature of card transactions disconnects us from the immediate reality of our expenditures?

The lack of tangible interaction with our financial resources creates a dangerous blind spot. When we choose the plastic alternative, we are shielded from the harsh truth of our spending until the dreaded bill arrives at our doorstep. In this delayed revelation, we find ourselves grappling with a distorted perception of our financial reality, unable to accurately gauge the magnitude of our expenditures in the heat of the moment.

However, the contrast becomes vividly apparent when we reach into our wallets and hand over physical currency. In that fleeting moment, as we witness our hard-earned cash leaving our grasp, a profound pause engulfs us. It is in this suspended state that we are granted a precious opportunity to reflect upon the true value of our money and weigh its worth against the desired purchase. The physicality of cash, with its tangible weight and intrinsic connection to our toil, serves as a powerful reminder of the effort required to earn it, forcing us to deliberate before releasing it from our possession.

The mere act of touching, feeling, and parting ways with our physical currency triggers a mental switch, prompting us to evaluate the significance of each expenditure and question whether it aligns with our priorities and financial well-being.

Financial Literacy

Faced with higher interest rates and the potential costliness of credit, Gen Zers, as a generation, may be more inclined to take a step back and reevaluate their financial decisions.

When inflation starts wreaking havoc, the financial world brings out its secret weapon: higher interest rates. Picture it as a superhero swooping in to save the day, caped in the cloak of monetary policy. These rising rates have a superpower of their own: they make credit a tad pricier for both companies and consumers. Why, you ask? Well, it’s all about putting a damper on their spending and investment enthusiasm. With credit becoming more expensive, the allure of instant gratification takes a hit. Companies think twice about launching new projects, and consumers might reconsider those impulse buys they were eyeing.

In essence, the contrasting experiences of card and cash transactions underscore the battle between impulsivity and mindfulness in our financial choices. It’s undeniable that Gen Z has grown up in an era where financial literacy and budgeting resources are more accessible than ever. They understand the importance of budgeting and see holding cash as a way to enforce discipline and stay within their financial limits.

The 2022 Investopedia Financial Literacy Survey reveals that Generation Z adults, aged 18-25, actively seek mental health support, boast greater diversity, and are better-educated compared to previous generations. While it’s important to avoid generalizations, it’s plausible to suggest that Gen Z, being mindful of their financial well-being, may exhibit more cautious spending habits inherently.

Bottom Line

It’s worth noting that Gen Z’s finances were wrecked-apart by the pandemic: 43% of individuals aged 18 to 24 found themselves struggling to keep up with credit card bills, rent, and various other financial obligations. With limited incomes and the need to manage their expenses amidst mounting economic pressures, Gen Zers have recognized that cash offers a concrete representation of their financial resources. A part of this surge in popularity can also be attributed to influential voices on platforms like TikTok, where proponents of cash stuffing have shared their success stories, revealing how this budgeting technique has enabled them to save more money and lower their monthly expenditures.