Like eating, drinking and sleeping, spending money is simply part of life. But that doesn’t necessarily make it fun. Indeed, most people dislike spending money, according to research by De Nederlandsche Bank (DNB). Their degree of dislike depends on various factors, including gender, age and the payment method used. In any case, teenagers generally find is easiest to pay with cash. These phenomena are discussed in a DNB study recently published in the authoritative Journal of Economic Behavior & Organisation.
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Anyone who has spent any time on TikTok recently has heard about it: ‘girl math’, or the illogical – but fun – way of justifying an expense. In one clip, a young woman explains girl math based on a dinner out with friends. She imagines using her credit card to pay the bill for the group. Some of her friends repay her in cash. That money did not simply come out of nowhere, but to her it feels like it did. ‘The cash I get from my friends is new,’ she explains with a straight face. ‘I can use it to buy myself something nice.’
This logic comes as no surprise to DNB researchers Marie-Claire Broekhoff and Carin van der Cruijsen. They surveyed some 2,500 individuals to learn about the negative emotions people experience when they have to pay for something, or the pain of paying.
Broekhoff explains: ‘Most adults experience payment pain when spending cash – more so than when using a debit card. It is no surprise that spending cash is more painful for them, as this is the payment method they learned to use when they were little. When they pay with cash, they can see the money physically disappearing from their pocketbooks.’
This brings her to a possible explanation for the ease with which young people spend cash. ‘We don’t know exactly why, as we weren’t able to ask the young people who participated in the study, but we strongly suspect that growing up with debit cards and smartphones has something to do with it.’
Teenagers have less trouble spending cash, she thinks, because the balance on their banking app tells them more about how much money they have than the cash they have on them. ‘If you pay cash, the balance in the app doesn’t change, and that makes the expense less painful.’ Young people have a high degree of implicit trust in their phones: the younger the participant, the more often they check their bank balance online, Broekhoff and Van der Cruijsen discovered.
The opposite is true for adults, who find it relatively painless to make a contactless debit card payment, but who experience relatively more discomfort when letting go of banknotes and coins. The pain of payment increases depending on what is being paid for. Paying for groceries in the supermarket is relatively more painful than spending money on an outing.
Whether someone has a lot or little to spend is also a factor. People struggling to make ends meet experience more pain of payment across the board than people with deeper pockets. Couples who share expenses experience slightly less pain when paying.
Although the concept of the pain of payment has a mostly negative connotation, it is actually a positive thing, explains researcher Van der Cruijsen. ‘If you experience pain when spending money, you will try harder to limit your spending. If you experience no discomfort at all, it is easy to go overboard with your spending, and that can get some people into trouble.’
The phenomenon of girl math is less innocent than it seems, she finds. ‘Whether in physical or digital form, money is money and it is important to spend it wisely,’ the researcher asserts. ‘If you don't learn how to budget and live within your means when you're young, bad financial habits could haunt you later in life.’
Bad financial habits include spending money on things that you really can’t afford, and this can lead to mounting debt and payment problems. Things can quickly get worse since contactless payment methods such as tapping at checkout are designed to make spending money as easy and painless as possible, encouraging people to spend more.
Broekhoff and Van der Cruisen therefore call for more research, for example into technical methods to increase the pain of payment such as an alert on someone’s phone when they make a big purchase. Van der Cruijsen notes: ‘It may not always be fun to see the contents of your wallet shrinking, but in the end it’s a good way to stay on top of your spending!’
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