Live Q&As

What a great way to start the chat. It does feel good to spend your hard earned saved money!

You took the right first step -- getting out of debt. Good for you.

Just strive to build your emergency fund -- 3 to 6 months of living expenses.

Put money in a separate 'life happens fund." That's a creation of mine in which you save for the things in life that happen such a a car repair, or maybe a vacation. The point is you don't have to dip into your emergency fund to pay for the things.

Greetings! Wow. It's great to see that so many people are interested in this question of the fate of cash, and approaching it from so many different angles. With some quick scrolling I landed here, so let me start here. (It's also nice to start small, or at least w/ small change.)

Go Canada! Nixing the penny is a no-brainer as far as I'm concerned, and many countries and central banker types around the globe seem to agree. Right now we're at about $0.024 to make a penny and $0.11 to make a nickel. That varies, of course, due to the spot price of the constituent metals, but there you have it. You need not be an economist to see that as some seriously skewed math. Should we follow our neighbors to the North (and the Aussie, Kiwis, Scandinavians, and others)? Heck yeah.

First, you are welcome. And new baby how very nice. My first baby is on a college tour right now meeting with school officials and hopefully wowing them so she can get some FREE money! She's 16. I feel so old. 

But anyway....talk to an independent insurance agent. I favor term because the cost is lower than whole, etc. and you get more coverage for your money. And it is a good idea to get some life insurance seperate from your job because if you lose your job you lose your life insurance often.

I'm writing about this for Sunday. But I agree about this sad trend of seniors dragging debt into their retirement years.

As for your advanced degree. Talk to you bosses. See what they think. You may be worried for naught. Perhaps just taking a class or two or going to a training session will satisfy any educational issues they might have for your job. And I wouldn't go back to school and incur any loans. Both my husband and I got advanced degrees. Most of it was paid by our employers and the rest with cash.

One of the topics I try to address in the book is the fact that money has different functions: medium of exchange, store of value, unit of account, blah blah. That is the textbook definition stuff, but it's actually crucial when thinking about how we treat (read: spend!) money, and how we have a habit of treating different forms of money differently.

Everyone knows it can be tough to break a $100 or $50 bill. Our brains know that a bunch of smaller notes may add up to $50, but there's something special about that $50--about the paper. When analyzing some of these behaviors and the various spells that cash casts on our minds, psychologists and behvaioral economists talk about things like "pain in spending" and "salience of the form." To cut to the chase, for many people the pain in spending is more severe, more palpable, when they have to fork over tactile objects, as compared to making a payment with electornic money in some form. This is no doubt a strong defense for keeping cash around. I try to dismantle, or at least scrutinize, that thinking in the book. But Americans right now are $800 billion in credit card debt, so something is obviously hurting people, and whether or not cash truly is the right weapon for fighting back, thousands, if not millions, of people believe it is the answer, and they have found an ally in it. That is a fact that technologists and digital money enthusiasts need to be senstive about. But the thing is, that cash has all kinds of costs and dark sides, too.

I agree. Where I differ with peopl on this is their thinking I don't value education for the sake of learning. I do. I have two degrees and my masters did not help me earn one extra penny or least I didn't get promotions, tv show, etc. just because I had it. But I wanted to learn more about business for myself so I got the advanced degree but with no debt.

I think parents, grandparents, educators need to be honest with students and help them see  that they need to do consider hard what jobs they can get with the major they want to take. If you are going to college with debt you can't afford to just go for the education. You need to get a J O B.

Zing! I love this comment. Ever heard of the tax gap? This is a boring term for an absolutely colossal problem: the gap between what taxpayers collectively owe and what we pay. The best estimate right now is that this # is ~ $400 to $500 billion a year. Not all of that evasion is cash-enabled, of course. But a huge chunk of it is. Big, big problem. And that's just one facet of the costs-of-cash prism. Cash management? Printing, moving, storing, securing, counting, inspecting, etc... -- all of that is ~ $150 billion a year. For a bit of perspective, that's 3x the budget of the Department of Education.

Bravo or Brava to you. I really mean that. I love these testimonies. And glad to be that annoying voice. I hear that a lot. Warms my heart. Just want everyone who is in debt to feel what you feel right now -- FREEDOM. It's priceless.

Wish you could see me now. Tearing up. Really. Of course I'm a big old cry baby.

I'm so proud of you. You prove what I tell folks all the time. That good things come to people who wait, delay things they can't afford. Save.

Kudos. I know others are on this chat and who will read later will celebrate for you. And it's inspiration for others.

I so understand your concern. I was worried about the cost of children too. Add in saving for college, the stuff they break, the sports, camps, clothes, movies for a family of five (we have three kids), etc. 

But with each child we did what you are doing, we looked at the cost, went over our budget and went for it when we saw we could make changes to cover the extra expenses.

It's not the romantic way to look at having children but it is realistic. 

If you can afford it and not tank yourself financially then go for it if that's what you want.

Besides if you are good to them and occassionally let them have want they want, you'll have a backup to help take care of you in your old age! I had three to increase those odds.

As mentioned earlier, I think it's wise. No--I think Canada's byebye to the penny is fantastic. However, the reason I bring up this idea in the book, this notion that forcing people to think a little too much about inflation might make them go beserk is a legitimate one, or it's at least worth considering. I'm not so pessimistic that I think American's can't have a rational, level-headed understanding of the role and realities of different currency denominations, inflation, purchasing power, etc. But when a financial journalist friend put this idea to me--that making people worry about the value of a penny might make them worry about the value of a dollar, and that could threaten the Whole Darn System--I was captivated enough thzat I wanted to put it in the book. FWIW, I also struggle to find strong reasons why Washington is so resistant to the idea of killing the penny. This one, although certainly speculative, if not a bit out there, seems to merit consideration.

I suppose the short answer to this Q is that we have paper $1 bills because people seem to dislike $1 coins even more. There is also the powerful lobby on behalf of a certain paper manufacturer in MA and some cotton (linen fiber) producers in GA, which I touch on early in the book. Yes, special interest groups even have a hand in the world of cash production.

I know I hated the dollar coin. Kept confusing it with a quarter. And as cheap as I am, I was not happy the few times people didn't tell me I had given them a dollar instead of a quarter. 

More on privacy--yeah! In thinking about the fate of cash, I found it quite amusing that just a day or three after Canada decided to kill the penny, we saw news of this huge data breach. It had a real one-step-forward-two-steps-back feel to it. On the other hand, for those of us geeking out on quesitons about money in various forms, the present is a very lively time!

Exactly. Well said. Well said.

And my point exactly. Fine if you want to major in English or Poltical theory. But also get some skills at the same time that will help you get a J O B. 

For starters, it's filthy. And expensive. And very helpful for criminals of every stripe (except B. Madoff). It's also most costly for those who have the least of it. This is a huge part of the book--and a rather counterintutive idea upon first glace--but let's see if I can hit on a few key points somehwere here...

YIPPPE! JUMPING UP AND DOWN FOR YOU! 

That's not yelling that's me excited. 

Love it. And a discount. Way to go. 

More celebration. 

It really wasn't too bad, right up until those handful of occasions when it was totally impossible. Paying the babysitter one night when my wife was out of cash (and babysitter's dad didn't have a PayPal account). Hopping a train ino NYC one time. And then, of course, when I got to India to report on what could be called the mobile money revolution. While reporting on that, ironically, I still needed some cash. There are some other episodes sprinkled here and there in the book. The truth is, though, it would have been infinitely harder to only use cash for the year. Think it through for a minute with your life and the things you have to pay for. Borderline ridiculous, right?

I actually have planned things at a hotel and the costs can add up. And you are right to an extent. But when the government is running a deficit and people are broke and unemployed it is just not good common sense to pay $75,000 for your team paid by taxpayers to build a bike. Play Jenga in the office for goodness sake.

Do you need that much house now? Ask that question. Lots of spouses try to hold on to a house that really, truly takes two incomes. Then I see the spouse who keeps the hosue lose it in the end. When you say financial stretch that concerns me. It often doesn't leave any room for error, job loss, illness, the things in life that happen. Might be better to sell and start over.

So to keep the dream going, you would hire a really good fee only financial planner to figure out how to protect the money but I doubt an adviser would suggest you set up accounts to stay withing the FDIC coverage. 

Frankly I think you would be just fine with a few accounts and some solid investments.

I know right. If you haven't read the piece I did on the Mega Millions, you had to. She had me falling out the chair. She was so dead pan when she said it. Like really, you ain't buying me hardly anything. So funny. But honestly I know lots of parents who are teaching their children well when it comes to handling money. The key is to just stay focused and look ahead. As the parents, grown ups, we know what it takes to live a good life without debt and financial stress. So when they ask for stuff or nag you just keep thinking about that. 

I know I provide them with a good home and we keep the drama to a minimum in the house so I don't NEED to buy them stuff to make them happy. I'm cool with the looks that say "I'm putting you in a nursing home" when I say no to the many things they want me to buy. I'm cool because right now that 16 year old (not 14) is on a college tour and we have the money saved to send her to a reasonably priced college. She doesn't have to take out loans. She doesn't even have to work during the semester (although we will require it for breaks and summer). We at least removed that stress.It feels good.

You see: careful and responsible financial behavior doesn't necessarily depend on physical money. And personal financial management tools are only going to get more clever, and only going to become more helpful when it comes to guiding us toward smarter financial decisions. Think about Quicken and how novel that was for people when it first came on the scene as a budgeting tool. Now there are things like Mint.com. The home screen for that service shows you your net worth right at the top of the page, and for most people with a mortgage, that means a negative number. I would argue that design and info deliver of that variety will have a tremendously positive impact on our financial behavior, which could be far more profound than the old-fashion earmarking-in-envelopes strategy espoused by people who have never given much thought to the wider societal costs of cash.

David, love that twist. So funny.

Another wonderful testimony. Keep them coming. Inspiration for all.

Tipping is one of the strongest defenses for keeping cash around in the short term. It would foolish to advocate for the cashless future prematurely, and until there is a way (or ways) to tip people who depend on cash tips for income, we definitely shouldn't go there. But I think technology will get us there. Something along the lines of aiming a phone at a code next to a name on a name badge--SOMETHING of that kind might be here before we know it. And it's worth adding that people tend to tip more when they pay w/ electronic money than when they pay w/ cash.

THANK YOU for this Q. Really. (And for level-headed delivery. A woman at a recent book reading put it slightly differently w/ something along the lines of: you classist b**tard!)

So the short answer is NO--electronic money is a tool you, me, Michelle, and many many people take for granted. This isn't about credit cards; not even a little. It's about access to a safe and secure means to store your wealth, however little or however much you have. For most of us today, that means having a bank account. We have all kinds of reasons to dislike bankers in 2012, but a no-frills bank account isn't one of them. Compared to the billions of people who are trapped using only cash, having the ability to toggle between electronic and physical money is a luxury, even if most of us in wealthier countires rarely stop to consider it as such.

When you are stuck using cash, the costs of cash skyrocket. Check-cashing services and their fees. Usurious local lenders, especially in poorer parts of the world. Your money is subject to theft, extortion, or destruction, and--this is key--it has a habit of being spent. I don't mean spent neccesarily on frivilous things. On the contrary, the poor are brilliant survivors, and they know how to stretch limited resources in incredible ways. But cash in hand (or under the proverbial mattress) has too many claims on it. The drunk uncle, the neighbor who needs a new pair of shoes, the roof that needs repairing, the child who needs medication for an ear infection. The problem is that to climb out of poverty and stay out, you need to save for bigger ticket investments. Schooling is the big kahuna, but something like farm equipment would be another good example. And it's so much harder to save without access to a savings account. Development wonks talk about this as access to financial services, but I would think of it more as simply leveling the playing field. Think of it this way: cash isn't merely expensive, it's that the costs of cash are unevenly distrubuted, and they hurt the poor more than anyone. Cellphones, it turns out, promise to change all of that.

I like this turn of phrase, "credit card for major purchases." I open the book w/ the story of the underwear bomber. And whenever I'm reminded of that episode, I'm still just baffled that this guy bought a one-way ticket to the other side of the globe with $2100 in cash (or whatever it was), and yet that fact, coupled with other warnings that had made it to the desks of law enforcement, he still almost blew up an airplane.

Not sure of any resources. But generally the same rules apply. Budget, budget, budget. 

I say when they are 50.

Just joking. I think we all have to be careful about passing on great wealth to our children. There is something to be said about working for what you have.

Don't pick it up. Really. From an economist perspective, the cost-benefit just isn't there. You risk a back injury when you stoop to pick up that essentially useless little metal round, which will cost you a lot more than a penny can buy. You might as well pick up every acorn you see on the sidewalk as well, and either sell them to a enthusiastic organic farmer at 2 cents per unit, or sign them with a Sharpie and see if you can sell them as artwork!

Good for you for sticking to this journey.

Before paying off the last bit of that $1,200 call to double, triple check the payoff. And have the lender give you a date that the payoff is good for. Then pay online and be done with it. And on to the next. 

So if you  really need to buid up your savings do a combination.

Keep saving, but pick one or two things you can do to make life easier and spend the CASH to do those improvements.

Then save some more. Stop and pick another project you pay cash for.

That way you are saving and improving your daily life.

Near term? No way. Medium term? I'm hopeful. There seems to be a number of different forces ganging up on cash like never before.

I think many will just pivot and move to the digital realm. But all of the thuggish ones, for lack of a better term, will have a tough time. 10,000 bank robberies in the US in 2009-2010. Surely not all of those entrepreneurs are tech-savvy enough to hack their way to riches. More broadly, I think this issue is just making business harder for them.