• Owen Stephens

A World Where Money isn't Real

Updated: Feb 6, 2021

Imagine a world where money doesn't exist. You simply walk into a store and take the things you need without giving anything to the cashier in return. Believe it or not, this is a reality. To children growing up today, money isn't real. I once heard of a child who watched their parents use ApplePay to buy something from a store, to which the child responded, "I wish I had a phone so I could buy things". To the children growing up today, money isn't real. For them, it is just an abstract concept.

The 10,000 Dollar Experiment

Adam Carroll is a father of three children. His family loves to play board games together, Monopoly is one of their favorites. Each of his children has their own distinct strategy, however, they constantly broke the rules giving each other loans just so they could keep playing longer. This made Carroll wonder if his children were playing this way simply because the money wasn't real. This is what lead him to conduct the 10,000 dollar experiment.

The experiment was simple. He withdrew 10,000 dollars from the bank in order to play one high stakes game of Monopoly. Winner takes all!!! (Well they win a 20 dollar prize. But to a 7-year old that might as well be 10,000 dollars). As he expected his children played the game differently now that they were using real money. His children became much more strategic and conservative with how they spent the money. This experiment brought up a topic that I found extremely interesting. The idea of Financial Abstraction.

Financial Abstraction

Financial Abstraction is the notion that as money becomes more of an idea, it affects the way we use it. As technology becomes more advanced, money is constantly becoming more and more of an idea. As a college student, I can attest first hand that very few people in my generation are using cash. Ten years ago if you tried to pay in a store they would ask you cash or check. Today they ask you debit or credit. Consumers often get frustrated when places only accept cash. Why? Because nobody carries cash.

I was in line for Taco Bell the other day in my student union. I was about number 7 in the queue of 15 people waiting to order when the person working the register announced, "I'm sorry but our card reader is not working. We are only accepting cash." To my delight and surprise, I was able to jump to the front of the line because I was one of only 3 people that had cash on them. Only 3 people out of the line of 15 college students had cash.

To some of you, this may be surprising. However, I can promise you this is the world we live in. With PayPal, Venmo, Credit/Debit Cards, ApplePay, and Google Wallet why would anyone ever need cash? However, these are all examples of Financial Abstractions. And they are affecting the way consumers spend money.

What Happened to Gold?

I am willing to bet the majority of people do not know that every dollar used to be backed by silver and gold. The picture below shows what money looked like before 1971 compared to what it looks like now. Prior to 1971, you could take your dollar bill into the bank and you could have it exchanged for silver. Every dollar bill had a tangible amount of silver associated with it and there was enough silver and gold to back up every dollar bill giving it value.

However, today they are no longer backed by anything. This is the first step towards the Financial Abstraction we see today. Now our money is no longer even paper. They are just a series of zeros and ones. Data packets sent from bank to bank with no tangible item attached to them. If every person tried to withdraw money from the banks at the same time the whole system would collapse because there is simply not enough money for everyone.

How Does This Affect The Way We Spend?

Some of the older people reading this probably remember a time when credit cards were not widely accepted. Stores took a while to adopt them because it cost those stores money to allow their customers to use credit cards. Some business owners simply refused to give credit card companies a percentage of their profits and just forced their customers to use cash.

However, McDonald's was curious to see how this would actually affect their business so they conducted an experiment, and what they found was shocking. They found that customers had an average receipt of $4.50 when using cash, and that average receipt jumped up to nearly $7 when using credit cards. This is similar to the Monopoly experiment mentioned before; the children were much more liberal with their money when it was not real. Needless to say, credit cards are now accepted almost everywhere.

Other studies have shown that people spend on average 12-18% more when using cards instead of cash. But why is this? The answer is Financial Abstraction. When using a card, money becomes more of an idea than a tangible thing. This affects the way we interact with it. The psychology behind it is quite simple.

Imagine the following situation:

You want to buy a drink. You give someone a dollar and they give you a drink in return. You had to lose something in order to gain something and your brain sees that.

Now imagine another situation:

You want to buy a drink. You give someone a debit card and they give you back your card and a drink. Your brain sees this transaction differently. Even though you really lost money your brain sees that you now have a drink but you haven't lost anything physical.


Consumer debt just hit an all-time high; by the end of 2018 consumer debt is supposed to reach 4 trillion dollars. I believe Financial Abstraction is to blame for this. Credit cards, Venmo, and ApplePay are just a few of the ways money is becoming more of an idea. This Financial Abstraction causes people to be less conservative with their money. Ever wonder why casinos make you use chips instead of just using cash? People are more willing to lose their money when it is simply the idea of money. When you are paying with a card you can't watch your pile of cash dwindle down to nothing. However, it is important to realize this is what is actually happening.

The Take-Away

I don't want to be mistaken; I love the advancements in technology. I believe that using biometrics (like a fingerprint) to pay for something is truly the future. However, it is more important than ever to teach children and yourself how to actually handle money. Young adults and teenagers are getting into massive amounts of debt simply because they have not yet been educated. Apple had to refund 32 million dollars worth of in-app purchases because kids were using their parent's phone and didn't realize they were buying things. This is a serious problem; the education system completely fails students when it comes to financial literacy. If you have a problem spending too much try using cash. We live in a world where money is no longer real. Understanding this will help you handle "fake money" more successfully, creating a better foundation for financial independence.

If you would like to start learning about personal finance, check out my post about the Top 7 Finance Books. This is a great place to start your financial education. If the school system isn't going to teach you then teach yourself. Let this be your first step toward financial success.


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