Legal tender: Seven reasons not to abandon cash just yet

Despite the rapid rise in digital payments, about 1.5 million Australians still use cash regularly, according to Treasurer Jim Chalmers. Cash can be a lifeline, he explained, when announcing plans last month to require all businesses in Australia selling essential goods, and healthcare suppliers, to accept cash for payment.

The move follows similar cash mandates around the world. The government has also warned banks that they need to keep regional branches open or they will pay a hefty levy.

About 94 per cent of businesses continue to accept cash in Australia.Credit: Dominic Lorrimer

However, branches have been closing in droves, making cash harder to come by, with 230 bank branches closing across Australia in the last financial year, and 2334 in the past seven years.

The latest data from the Reserve Bank shows that the total value of cash withdrawals was $106.85 billion in the year to September this year, rising by $2.35 million on the previous year.

And while cashless payments continue to be the preferred way for many of us to pay, here are seven reasons why we shouldn’t abandon cash just yet.

1. To support local businesses. While many businesses now accept digital payments, there are still plenty of smaller establishments that prefer cash transactions, including street vendors, family-owned corner stores and smaller operators.

Cash ensures you can have some privacy about what you spend your hard-earned money on.

Most merchants need to pay a fee to process credit-card transactions, which can eat into profits. Using cash helps these businesses avoid transaction fees.

The Australian Competition and Consumer Commission says businesses can decide which payment types they accept, as long as they make buyers aware of payment terms before purchase.

2. To stay within budget. Despite online banking and shopping increasingly common, for many, their relationship with cash is critical to how they manage their weekly budget.

A number of people are still using cash to budget, with the envelope cash stuffing trend particularly popular with millennials.

Studies have indicated that people spend significantly less when using cash as payment, as opposed to swiping a card. Overspending with cash is much more difficult because cash provides a visual cue that we are about to part with our hard-earned money.

3. Cash promotes financial inclusion. People in regional areas, particularly older people, aren’t able to access online payments. With bank branches closing down, they could find it difficult to purchase important items, such as medicine and groceries.

4. Protection from tech glitches. While digital payments can fail, cash doesn’t let us down. Cash is also relied on in regional areas of the country where internet connections could be unreliable and payments need to be made.

If there has been a power outage or a natural disaster where electronic payments don’t work, cash can be a lifesaver. Or, if you just need to get home and your bank card has failed due to an outage, it’s handy to have cash on you.

5. When buying from Marketplace. When purchasing something on Marketplace or Gumtree, many buyers will insist you use cash to complete the transaction.

When it’s your turn to sell something, you’re going to feel far more comfortable being paid in cash, too. There are so many scams out there that handing over cash for a purchase is far simpler.

6. To teach kids about money. A weekly allowance to our kids helps them understand currency and also develop good savings habits.

Whether you use money guru Scott Pape’s jam-jar system to show kids how to separate their earnings into ‘spend’, ‘save’ and ‘give’ categories, or are helping them save up for something special, cash is a great teaching tool for younger ones.

Handing over cash for a purchase also helps kids understand the value of money and see how much things actually cost.

7. For privacy reasons. Have you tried to take a decent amount of cash out over the counter at your bank lately? The teller is required to ask what the money is for, and records that in your bank record.

But not everyone needs to know our business, and cash ensures you can have some privacy about what you spend your hard-earned money on.

There are plenty of reasons this is preferred, including surprise birthday gifts for your partner or in cases of domestic abuse, and to protect from data and identity theft.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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