Does spending in cash help you budget?

How often do you use cash and how much do you currently have in your wallet?

I rarely spend cash these days and often don’t carry any, even though I have £50 in my wallet at the moment.

But that’s a sign of how little I use physical money: It’s been in there since December 29 when a friend wanted to pay cash for a shared family lunch and I took his notes and paid the bill on my card.

This is also a classic example of how my attempts to use cash to budget often turn into false economics.

The moment he snatched those nice sharp twenties and fives from him it made sense: ‘I don’t have cash, it’s always good to have some, I might need some in the next few days etc.’

But what has happened is that after Christmas my bank account now has a bigger hole of £50 and a fortnight later I still have fifty pounds untouched in notes that will probably be sitting in my wallet for a long time to come.

This example came to mind during a conversation about cash with some of the This is Money team after a Nationwide report on the subject arrived.

Britain’s largest construction company said its use of cash was on the rise – weathering years of decline – with people using it to budget in the cost of living.

Nationwide said it had seen its use of cash rise for the first time in 13 years, with 30.2 million cash withdrawals from its machines last year – a 19 percent increase from 25.5 million in 2021.

Last year’s figure is still significantly lower than the 44.5 million seen pre-pandemic in 2019, but represents a significant recovery from the twin Covid hit years of 2020 and 2021.

Otto Benz, Nationwide’s director of payments, said: “For the first time in years, we are seeing a natural increase in cash withdrawals as people return to using cash to avoid being indebted by the rising cost of living.”

But in a world where card payments are increasingly becoming the norm, does using cash to budget still work for most of us?

I can imagine what it would be like for those who are really struggling to make ends meet, who could withdraw a set amount from an ATM and then try to spend only up to that limit.

But for the wider majority, who may feel the squeeze but don’t have to live on a bare minimum, I can see this being more difficult in practice.

A fair portion of my weekly spending isn’t feasible or even possible in cash: ranging from contactless tapping for trains, to our online weekly grocery store, and the office cafeteria, and several other places that now only accept cards.

So much money is leaking digitally that it seems pointless to keep my budget under control with hard money.

But am I just lazy? Do others use cash and budget better than I do?

Not if my small (and unrepresentative) sample of This is Money journalists is anything to go by, they all said they rarely use cash and that attempts to do so for budgeting often fail due to unintended consequences.

The problem of breaking a note and the apparent disappearance of the coins you get as change also came up more than once.

I did track down one fan of cash, our former deputy editor-in-chief Lee Boyce – now editor of our sister newspaper Money Mail – who has long been a proponent of not just spending money on debit cards.

Lee says he still uses cash regularly and one of the things he does is take out £100 on payday as a bit of ‘fun float money’ which he uses for ‘the little pleasures: pub, magazines, lunch, etc. on top of what I’d better spend on those kinds of purchases’.

On a recent trip to the west coast of Ireland, he also used cash largely, saying that not only does he find cash helps him budget for holidays, but he also enjoys using it with his daughter and teaching her about different currencies.

That last example probably applies to many of us, who are much more likely to spend cash on vacation than at home because they’re not sure we can rely on cards in an unfamiliar environment.

I also find myself having to remember to have some cash before heading to more rural parts of the UK, where I regularly stumble over my London-focused ‘stuff is open all day and I can pay by card everywhere’ laissez faire attitude.

In terms of day-to-day life, however, I don’t see myself participating in the move to greater cash use.

I’m not in favor of a cashless society – it’s worth remembering that central banks, governments, banks and businesses love digital spending. because they can track it and there’s less friction, we’re encouraged to spend more — but dropping the debt card just doesn’t seem practical.

However, what I’ve considered is the modern equivalent of using cash to budget: getting an extra checking account to pay a set amount each month for expenses.

I could see this both creating a little more friction and giving me a much better overview of where my money is going.

If you’ve done this, have similar ideas, or have switched back from cash to budget, tell us in the comments below or let me know by email at editor@thisismoney.co.uk with Cash Budgeting at the start of the subject line. We publish the best ideas.