Podcast Title: How to Money
Episode: The Power of Cash w/ Jay Zagorsky #995
Host/Author: iHeartPodcasts
Release Date: June 11, 2025

Introduction

In this enlightening episode of How to Money, hosts Joel and Matt engage in a profound discussion with Professor Jay Zagorsky, an economist from Boston University's Questrom School of Business and author of the newly released book, The Power of Cash: Why Using Paper Money is Good for You and Society. The conversation delves deep into the declining use of cash in favor of digital payment systems, the societal and personal implications of this shift, and the enduring importance of maintaining cash circulation.

Guest Introduction

[02:10] Joel: "Welcome to How to Money. I'm Joel. I'm Matt, and today we're talking about the Power of Cash with Jay Zagorsky."

[02:36] Matt: "Our guest today, well, you, you better believe he disagrees [with the cashless trend]. We are joined by Professor Jay Zagorsky, who is the author of a new book that was published just a couple of months ago, The Power of Cash."

Key Discussions

1. Privacy and the Use of Cash

Professor Zagorsky emphasizes the privacy benefits of using cash over digital payments. He illustrates this with a personal anecdote:

[06:14] Professor Jay Zagorsky: "When I use cash and buy something, my wife knows I bought it, but she doesn't know the price. She enjoys the purchase without questioning the cost, something that digital transactions like Visa or MasterCard receipts make transparent."

This underscores how cash transactions can offer a layer of privacy that electronic payments often lack, preventing others from having detailed insights into one's spending habits.

2. Digital Payments and Spending Behavior

The hosts and Professor Zagorsky explore how digital payments can lead to increased spending due to the "pain of paying" being minimized.

[10:00] Joel: "What has the shift from cash to credit impacted us as a society? It seems to have led to a lot more debt."

[10:00 – 11:20] Professor Jay Zagorsky: "Electronic payments encourage us to spend more because there's no immediate mental impact when swiping a card or tapping a phone. Cash, on the other hand, acts as a hard limit, making us more mindful of our expenditures."

He elaborates on the concept of the "pain of paying," explaining that handling physical money creates a tangible sense of spending that digital transactions do not, leading to more impulsive and higher spending.

3. Impact on Society

The conversation extends to the broader societal implications of moving away from cash, including the economic effects of credit card fees on merchants and ultimately consumers.

[13:19] Professor Jay Zagorsky: "Visa and MasterCard charge about 2% per transaction, and more premium cards with rewards can cost merchants even more. This cost is often passed on to consumers through higher prices."

Additionally, Buy Now, Pay Later (BNPL) services, which charge merchants a 5-6% fee, are discussed as a catalyst for increased consumer spending, as they lower the immediate financial barrier to purchases.

4. Emergency Situations and Resilience

Professor Zagorsky highlights the necessity of cash during emergencies when digital systems may fail.

[17:45] Professor Jay Zagorsky: "During power outages or other disasters, electronic payments become unusable. Cash remains a reliable medium for transactions, ensuring individuals can continue to purchase essentials."

He references recent power outages in Spain and Portugal as examples where cash was indispensable when electronic payments were impossible.

5. Global Perspectives on Cash Usage

The episode examines how different countries handle cash usage, with a focus on Japan, Germany, China, and Sweden.

[27:49] Professor Jay Zagorsky: "In Japan and Germany, cash remains king. In contrast, countries like China and Sweden have largely moved towards cashless societies. For instance, in Sweden, accessing cash requires appointments weeks in advance, limiting its practicality in emergencies."

6. Teaching Financial Literacy to Children

The hosts discuss the importance of using cash to teach children about money management and mathematics.

[33:20] Professor Jay Zagorsky: "Using cash teaches children essential math skills, such as counting and understanding fractions. Cash transactions make financial decisions tangible, fostering better budgeting habits."

He argues that reliance on digital payments can erode these fundamental skills, making it harder for children to develop sound financial practices.

7. Health Considerations

An intriguing aspect of the discussion touches on the health implications of cash versus digital payments.

[35:25] Professor Jay Zagorsky: "When you pay with cash, you are more conscious of your spending, leading to healthier financial choices. Additionally, the physical handling of cash can keep certain cognitive skills sharp, like mental arithmetic."

While not heavily emphasized, the conversation briefly touches on the notion that using cash requires more deliberate action, which can have subtle benefits for mental health and cognitive function.

8. Cryptocurrency and Cash’s Role

The role of cryptocurrency in the modern financial landscape is also explored, with Professor Zagorsky expressing caution.

[45:42] Professor Jay Zagorsky: "Cryptocurrency requires electricity and an internet connection, making it as susceptible as other digital forms during disasters. Unlike cash, if digital infrastructure fails, access to cryptocurrency can be lost."

He likens cryptocurrency to credit and debit cards, emphasizing that it doesn't mitigate the vulnerabilities associated with digital transactions.

Notable Quotes

• Privacy and Cash:
  [06:14] Professor Jay Zagorsky: "I pay cash when I splurge on my bottle of wine, and I get some privacy. My wife enjoys the wine without knowing the price."

• Spending Behavior:
  [10:00] Professor Jay Zagorsky: "It's called the pain of paying. When you use cash, you feel a bit of regret, but with digital payments, there's no immediate impact, leading to increased spending."

• Societal Impact:
  [13:19] Professor Jay Zagorsky: "Stores and banks love electronic payments because they encourage us to spend more and get deeper into debt."

• Emergency Resilience:
  [21:20] Professor Jay Zagorsky: "Cash is a muscle. You need to use it regularly to keep its utility and functionality intact during emergencies."

• Teaching Children:
  [33:20] Professor Jay Zagorsky: "Cash transactions teach children essential math skills and help them understand the value of money in a tangible way."

• Global Perspectives:
  [27:49] Professor Jay Zagorsky: "In Sweden, cash has become so scarce that accessing it requires appointments weeks in advance, limiting its practicality."

• Cryptocurrency:
  [45:42] Professor Jay Zagorsky: "Cryptocurrency isn't fundamentally different from credit or debit cards in terms of vulnerability during disasters."

Practical Takeaways

1. Incorporate Regular Cash Usage:
   Professor Zagorsky recommends using cash at least once a week to maintain its circulation and keep financial habits in check.
   [03:58] Professor Jay Zagorsky: "Use cash at least once a week."

2. Maintain an Emergency Cash Reserve:
   Aim to keep a week's worth of expenses in cash to prepare for potential disruptions in digital payment systems.
   [47:28] Professor Jay Zagorsky: "Keep roughly about a week around in your wallet... approximately two to three weeks' worth of cash."

3. Be Mindful of Spending Triggers:
   Recognize how digital payments can lead to overspending and consciously limit their use to areas where budgeting is essential.

4. Promote Financial Literacy in Children:
   Encourage the use of cash transactions with children to help them develop crucial math and budgeting skills.

5. Advocate for Cash Accessibility:
   Support policies and practices that ensure cash remains a viable and accessible payment method for all, especially in emergencies and for vulnerable populations.

Conclusion

This episode of How to Money underscores the multifaceted benefits of maintaining cash usage in an increasingly digital world. Professor Jay Zagorsky provides compelling arguments on privacy, financial discipline, societal resilience, and the importance of cash in emergencies. By adopting even minimal cash-centric habits, individuals can enhance their financial well-being and contribute to a more robust and inclusive economic system.

For more insights and resources, listeners are encouraged to visit thepowerofcash.com to explore Professor Zagorsky's work further.

For additional resources, links, and show notes, visit howtomoney.com.