Hey there, curious about cash eh! We've got an exciting story to tell you about the comeback of something you might not use often: cash! In the digital age, cash seemed to be fading away, but it's making a strong return in the UK. We'll dive deep into the reasons behind this resurgence, supported by the latest statistics and insights.
Cash in Decline
For years, cash was becoming less popular in the UK. People were using cards and digital methods to pay for everything, from toys to takeaways. In fact, the use of cash had been going down for a whole decade. But something interesting happened in 2022. Let's talk about the use of cash spending coming back in use alongside digital.
The Unexpected Comeback
According to data from The Guardian, cash made a surprising comeback in the UK. More and more people started using banknotes and coins again. This was the first time in ten years that cash payments increased! So do you want to know more about the resurgence of cash?
Why did this happen?
The Cost of Living Crisis: The cost of living became a big problem, and people turned to cash to help them manage their money. Cash feels more real and helps some folks budget better.
Lots of Small Visits: People started going to supermarkets more often for small trips instead of doing one big grocery shop. This meant they used cash for these smaller purchases.
Digital Payments Still Popular: Even though cash was making a comeback, digital payments were still the most popular way to pay in 2022. Debit cards ruled the roost, and contactless payments went up by a whopping 30% to 17 billion transactions!
Going fully digital reduces your anonymity: Paying digitally as we can see when reading our bank statements allows for all our spending habits to be listed and recorded. Paying in cash allows you to buy products without having a digital written record.
The Numbers Tell the Story
The total number of payments in the UK went up to 45.7 billion in 2022, from 40.4 billion in 2021. That's a big jump! But what's even more interesting is that cash payments went up by 7% to reach 6.4 billion, despite many businesses going card-only.
The Mini-Renaissance of Cash: People who barely used cash before started using it more. This was a big change from previous years when more and more people were going cashless. In 2021, 23.1 million people used little or no cash, but in 2022, it dropped to 21.6 million.
Why Did People Choose Cash Again?
People started using cash because they were worried about two things: Inflation and the rising cost of living. When prices go up, it's nice to see and feel your money. It helps you keep track of what you're spending. This is great for those of us who have discovered cash budgeting as a great way to help control budgets, spending and saving and grow our wealth in this time of the cost of living crisis.
UK Finance, a banking body, said, "Growing fears about inflation and the rising cost of living have meant some people are making greater use of cash as a way of managing budgets."
But Will Cash Stick Around?
Even though cash is making a comeback, experts think it might not stay this way forever. They believe that when inflation goes down and people feel more confident about the economy, they'll go back to using less cash. We will keep an eye on this trend through the next few years to see has the increased use of cash coincided with the trend of cash budgeting and some suspicions around going fully digital.
UK Finance had predicted that by 2031, there would be fewer than 3 billion cash payments in the UK, making up about 6% of all payments. Now, they say it might take until 2032 for that to happen, with about 3.3 billion cash payments, or 7% of all payments.
This graph below shows the trends on how money is being used which I thought was interesting based upon the age groups (as seen in the Financial Times online).
Changing Ways to Pay
Apart from cash, there's another way people pay for things that you might not have heard of: "Buy Now, Pay Later" or BNPL. It's like getting something now and paying for it later. In 2022, about 12% of people in the UK used it, which is about one in eight.
But guess what? Older folks, like those aged 65 and above, started using BNPL more in 2022. 8% of them used it, up from 4% in 2021. It's fascinating how different generations adapt to new ways of managing money!
However, BNPL is not great to use if you have debt such as credit card debt, as you may be used to thinking about paying later, but if you don't get to pay later you build up debt... and with credit cards you pay interest on that debt. So if you are starting out on Cash Budgeting, use the cash. Save up for you need to buy, it's hard to hold off but it teaches you a lot of patience and you will not get into debt. Using cash hurts more when you spend it as you can physically leaving your wallet, yikes! But when your car needs sudden repairs to get you to your job, you can't wait to save up the money first- this is why we have an emergency fund saved so that when (I say when not if!) things break you have the cash or a good portion of the cash to pay for repairs or replacements. By having this emergency fund you can then break the cycle of needing to use a credit card and get into debt for those emergencies.
What Does the Future Hold?
As we look ahead, it's clear that the world of payments is always changing. Cash has made a remarkable return, but will it continue to be a part of our lives in the long run?
Some experts say that when inflation goes down and people feel more confident about the economy, they may start using less cash again. But others believe that cash is here to stay, at least for a while.
During the summer of 2023, proposals to ensure that the access to cash was protected was produced by the UK Government, with the Financial Conduct Authority overseeing banks’ role.
So in conclusion
So, there you have it, our journey into the comeback of cash in the UK and perhaps beyond. It's not gone for good, and it's proving to be useful in a world where we're always talking about digital this and digital that. Will cash continue to make a comeback, or will digital payments take over again? Only time will tell, but for now, cash is back in the spotlight, and it's here to stay, at least for a while!
As you continue to explore the world of money and finance, remember that the ways we pay for things can change, but understanding the value of money and how to manage it is a skill that will always be important. Whether you're using cash or digital methods, the key is to make smart choices and use your money wisely.
Happy exploring!
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