Copyright CNBC
"Cash is king," the saying goes. But younger generations prefer to use their debit and credit cards. Nearly a third of Gen Z said people who use physical cash are "out of touch" or even "cringe," according to a new Cash App survey of over 2,000 U.S. adults. Beyond the ick cash seems to give them, 54% of Gen Z respondents said they're more likely to spend without thinking when they use cash versus paying with a card. A similar share of millennials agreed, while just 33% of Gen X and 21% of baby boomers said they feel this way, the survey found. "We are starting to see these generational divides around how people perceive cash," says Lindsay Bryan-Podvin, a financial therapist for Cash App. "Older generations view cash as more real, more tangible," Bryan-Podvin says, while Gen Zers and millennials are "not necessarily experiencing that same realness around cash." Some research has suggested that people tend to spend less money when they're using cash versus swiping a card. The Federal Reserve Bank of Boston's annual Diary of Consumer Payment Choice has historically shown consumers have a preference for using cash for smaller transactions. In 2024, however, consumers made the same number of debit card and cash transactions for purchases under $25 for the first time in the study's history, the Fed reported. Consumers are also psychologically more comfortable spending when they use a credit card, a 2001 study by two Massachusetts Institute of Technology professors found. Money management strategies like "cash stuffing" and "cash diets," in which participants predominantly use cash for their savings or expenses, can be a "helpful thought exercise or practice," Bryan-Podvin says. But given younger generations' feelings about cash, they may be "less beneficial now that we are so digital," she says. How one person feels about spending cash versus swiping their card is really about exposure, Bryan-Podvin says. For older generations who may not have grown up with as many, if any, digital payment options, cash was the way they learned to manage money. It may feel more natural to get back to those basic principles by going on a cash diet or using another cash-based strategy. Younger adults are more likely to have had early exposure to digital money tools like the ability to check their account balances right from their phones. As a result, they may not get the same "real" feeling when they pay with cash. However, cash-averse adults may adapt methods like cash stuffing for the digital age, Bryan-Podvin says. One way to do that is by using a certain debit card or checking account dedicated to "fun money" for discretionary spending. "When they tap or swipe their card and it doesn't go through, that is their version of, 'Oh, shoot, I don't have any money in my wallet,'" she says. While cash-based strategies may help you meet your financial goals, it may be wise to keep savings in interest-bearing account, such as a high-yield savings account, Bryan-Podvin says. "Having cash as your emergency fund just isn't the safest choice," she says, referring to actual physical bills. Not only do you miss out on earning interest, but safeguards like insurance if your bank goes under and the ability to lock your debit card if it gets stolen can make putting your cash in a bank account a better option, Bryan-Podvin says. "It's fine to do a little bit of money in cash, but I would recommend making sure that you have it protected," she adds. "We've seen fires, we've seen floods, we've seen tornadoes, and even if you have a solid emergency fund [in cash], if something happens to it, then all of that hard work also goes out the window with it when you're already in a situation that's tough." Want to level up your AI skills? Sign up for Smarter by CNBC Make It's new online course, How To Use AI To Communicate Better At Work. Get specific prompts to optimize emails, memos and presentations for tone, context and audience. Plus, sign up for CNBC Make It's newsletter to get tips and tricks for success at work, with money and in life, and request to join our exclusive community on LinkedIn to connect with experts and peers.
