I’m starting to think how we pay people for work done matters.

Cash feels like we’re handing something tangible to another person.  It’s real.  It’s limited in our pockets and wallets, even if we can go to an ATM and replenish our supply.  Psychologically, I treat cash in my wallet differently than I treat plastic, even when I use my debit card, and as a result, I tend to make more careful and considered choices.

Checks are the next level of payment.  They require us to write out the number, consider the balance in our account, and otherwise take stock of what the numbers and payment mean in a larger context.  While it separates us a degree from the cash transaction, it still requires a more intensive action than other forms of payment.

Payments by debit and credit card are more elusive.  We can get stuff by flashing this little piece of plastic for goods, but the day of reckoning is not immediate.  We can easily overextend the amount we intended to spend, and even exceed our limit, with little or no consequences until some point in the future. (Unless of course, you are in enough debt to warrant a phone call about exceeding your limit while in the store.)  This postponing of accountability for money spent tends to make the expenditure itself feel somewhat artificial, and the bill at the end of the month has caught more than one consumer by surprise.

Banks know this, of course.  The more people that spend through plastic and the fewer that pay through cash, the more they are likely to spend and the more fees and interest are generated for the company.  This is why people are given debit cards almost automatically for every bank account, with the hopes that you will spend your money, rather than make the bank hold on to it for you.  Your deposit is an asset for you, but a liability in the big picture to the bank, who then “owes” you that money on demand.

It’s also why new forms of transactions- electronic, the wave of a pass at a gas station or card machine, or payment through a cell phone or text message are equally attractive to people wanting your money, but more dangerous for you, as the exchange seems less and less real, less memorable, and the only reminder is the bill at the end of the month.  Even that ugly physical reminder of your spending and psychological prompt to be more judicious in your spending is becoming removed to the digital realm, where every company is encouraging you to pay bills electronically, saving them the cost of mail and of processing your check.  It also removes any and all excuses for “But the check’s in the mail” or “I never got my statement”.

As this recession drags on and people continue to have money troubles of one form or another, maybe one place to consider making changes is in the form of payment you choose.  Cash will keep you more accountable by far.

However, even I succumb to the lure of electronic payment of debt.  I put my kids on a plan where I direct deposit their allowances into their account, eliminating every debate about allowance, but likewise complicating and making the threat of suspending allowance all the more distant and vague.  They love feeling like grownups and having more control over how they spend their allowance, including using a debit card.  I’m hoping this will teach them how to manage money, even virtually, while they’re young, rather than having their first credit and debit experience closer to college.

Virtual payments and management of money and credit are skills we all need to have.  Build these skills into your kids as soon as you can, because these payments are not just in the future, but they are the now.  And the more divorced we becoming from the tangible forms of payment, the less direct accountability and more mistakes we’re all prone to make.