Disruption can be costly.

Millennials may be winning the battle to wear flip-flops in the office or work from the beach. But when it comes to how they treat cash, disruption may have a price.

Young people do not carry tangible loot; one in four carries less than $5 in bills and coins when they leave home seven days a week. They basically hate cash—unless it is in their investment portfolios. There they hold hordes of cash equivalents. Some 38% of investors under 30 prefer savings accounts and bank CDs to stocks, bonds and gold, according to a Bankrate survey.

This behavior stands long-held practice on its head. Start with those investment portfolios. Yes, stocks can fall. Young people saw their parents and many others take a huge portfolio hit in the Great Recession. The fallout left a lasting impression, and some swore off stocks for life. But that is the wrong lesson to take away. Stocks regained all that lost ground in just a few years. Only those who could not afford to wait for the rebound lost out.

Over the long term nothing beats the return of a low-cost, diversified stock portfolio. Young people are best positioned to benefit because they have three decades or longer to wait out the bumps. Yet just 26% of people under 30 invest in stocks. Holding giant wads of cash is smart past age 70. But holding it decades earlier makes your financial goals almost impossible to achieve. A cash-heavy portfolio isn’t as safe as you imagine. It may actually lose value over time. With short-term interest rates below the inflation rate, the spending power of cash falls.

Young people are ahead of the retirement savings game in some respects. They are saving more and earlier—just in the wrong places. To keep things simple and safe, set up an automatic investment account—your 401(k), for example—and steer all contributions to a target-date mutual fund.

If cash is a horrible but popular option for a young person’s portfolio, it is a wonderful but unpopular option for their wallet. Years of research shows that those who spend cash—not plastic—feel the sting of spending more acutely and spend less. A team of researchers led by Avni M. Shah, an assistant marketing professor at University of Toronto, recently concluded that people assign greater value to things they purchase with cash. They showed that those who donated to a charity by check, not credit card, were more likely to donate again. They also showed that those who bought a $2 mug with cash demanded 75% more than those who paid with plastic, if they were to resell the mug.

Hard cash has drawbacks. If you lose it you can’t get it back. It’s less convenient than swiping plastic, flashing a screen on your mobile device, or sending money via Paypal, Splitwise, or Venmo. It’s also more difficult to track cash spending. Why save receipts when a bank is willing to keep track of everything for you? These are all good reasons to favor plastic and digital payments. Within 20 years there will be no more ATMs, one expert predicts.

But maybe it shouldn’t be so easy. Human beings are prone to impulse spending, and the less painful the process the more likely they are to buy something they don’t need or even really want. Cold cash makes you stop and think because parting with it stings. In an under-saved nation, that’s probably a good thing.

If you are hooked on digital payments and plastic for the right reasons, consider some simple strategies for curbing your spending. For example, wait a week, or at least a day, to buy something you wanted instantly. Odds are you won’t go back. Technology will only move forward. It is critical that we master it before unparalleled convenience empties our coffers.

Posted in Columns on July, 2016