What Is the Difference Between Cash Transfers & In-Kind Benefits?

Cash transfers are paid directly to the recipient.

Cash transfers are paid directly to the recipient.

As you start out in life and begin to build financially for the future, it is important to take advantage of any benefits available to you. Government benefits can fall into two categories: cash transfers and in-kind benefits. Remember — there's no such thing as a bad benefit, so long as you take proper advantage of it. Be sure to understand each type, and how you can put them to work for you.

Cash Transfers

Cash transfers are benefits paid by the government, to individuals, in the form of cash. For example, if you are injured on the job, you may be eligible for workers' compensation benefits. These benefits are paid in cash, not in the form of a product or service, so they are classified as a cash transfer.

In-kind Benefits

In-kind benefits, like cash transfers, are benefits paid to individuals by federal or state governments. Unlike cash transfers, these benefits are not paid directly in cash. Instead, the individual receives goods or services for free or at a reduced rate. A good example of this is Medicaid. When you are starting out in life and establishing yourself financially, you may qualify for Medicaid benefits. The government does not simply give you a check, but rather covers some of your medical costs.

Advantages of Cash Transfers

The benefit of cash transfers is that you can use them in any way that you choose. For example, unemployment benefits are intended to help you cover living expenses if you lose your job, but you are not forced to spend them on this; you could, for example, invest your benefits. This gives you greater freedom to use the benefits in a way that suits your specific situation.

Advantages of In-kind Benefits

While having financial freedom can be advantageous, being limited can also have its advantages. Because in-kind benefits must be used for specific things, it can force you to take advantage of things that you should use — but might not if you had the choice. For instance, when you're young and feeling invincible, you might prefer to spend your money on your investment portfolio, instead of a visit to the doctor. However, Medicaid doesn't give you that choice, making you more likely to take care of your health.

 

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