Our Relationship with Money Is Changing – What Does This Mean for Retirement Savings?
Throughout history, the way we’ve paid for goods and services has always changed with the times. Before there was money, we bartered for the things we wanted and needed. We then used gold as the standard for ensuring value, before adopting modern currency.
Now, as we look across the world and see businesses and consumers preferring digital payments and credit cards, even the once strong “Cash is King” phrase may need to be rethought. But as our preferences regarding money continue to change, will our savings habits change with them?
As a society, our views toward money have changed drastically over the years. And much of that change, especially recently, has been due to technology. Smart phones and social media have opened up doors to faster communication with higher expectations. Within the last 10 years, we have seen the creation and widespread adoption of solutions such as PayPal® and Venmo for easily transferring money and Apple Pay and Google Pay for paying merchants.
According to Forbes, 10 years ago, six out of every 10 transactions were made with cash. Today, it’s just three. To accommodate this trend, many stores are reducing their credit card minimums, and some have even stopped accepting cash altogether.
As we look at money less as a physical thing that we can count and maintain, will its perceived importance for our future change, as well? Will something that is all-digital have the same effects on our mentality toward saving for retirement?
The importance of saving for retirement cannot be overstated. One of the reasons we are facing a retirement crisis in America today is because retirement often seems like something that is far off in the distance and not something to worry about now. It’s less tangible and less prescient.
One possibility is that as cash disappears and more transactions are conducted through credit, we will end up spending more in the near term. It’s probably safe to say it’s easier to make more frivolous purchases when you don’t see the actual money leaving your pocket. These spending behaviors could lead to depleted savings and an even greater retirement crisis than we are experiencing now.
On the other hand, this digital shift in our preferences allows us to better track what we spend our money on. Having transactions conducted digitally grants us greater transparency into our spending and savings habits – which could lead to more interest and an easier way to track progress toward retirement.
Saving for the long term is a process, and changing consumer preferences could lead to better long-term results. In fact, Millennials are behind much of the progress toward digital payments and money sharing but are also much more focused on retirement savings than generally perceived.
No matter what the future brings, whether it’s a completely cashless society or not, Millennium Trust is here to help you save for your retirement.
To learn more about what’s right for you and your savings goals, visit our Financial Calculators.
The material in this blog is presented for informational purposes only. Millennium Trust Company performs the duties of a directed custodian, and as such does not sell investments or provide investment, legal or tax advice.