Pros and Cons of 'Cash Stuffing' to Save Money in 2024 (2024)

"Loud budgeting" isn't the only big TikTok personal finance trend. Some Gen Zers are also using social media to proclaim their enthusiasm for a way of budgeting that is much more old fashioned. Older generations might know it as "the envelope method." But Gen Z calls it "cash stuffing."

With cash stuffing, Gen Zers are trying to regain control of their personal finances by spending only cash, and by assigning their cash toward specific purposes, categories, and goals. Cash stuffing videos have gotten millions of views on TikTok, where creators share details about their paychecks, monthly budgets, and future goals -- and show videos of their visually appealing cash piles, binders, money-sorting organizers, and envelopes.

But is cash stuffing a good idea for your budget? Let's look at a few possible pros and cons of cash stuffing for Gen Z -- or people of all ages -- who want to save more money in 2024.

Cash stuffing: Why it could be the best way to budget cash

Many Gen Zers are looking for a higher level of clarity and proactive planning for how to spend and save; cash stuffing is a response to this understandable need for control.

Here are a few good reasons to try cash stuffing.

Cash stuffing advantage No. 1: Seeing is believing

There's an old saying that "out of sight is out of mind." Sometimes the convenience of credit cards and online bill pay causes people to lose track of their spending -- before you know it, you're spending more than you can afford.

Cash stuffing lets you literally see and handle your money, right before your eyes. Seeing an entire paycheck as a pile of cash might feel more "real" than just another number in a bank account. Some people might find that they're less likely to impulsively spend cash.

Seeing a pile of cash sitting on your kitchen table, it might feel harder to just go out and shop; you might feel that cash is easier to save. If cash stuffing could help you better understand the value of a dollar -- and figure out how to save more dollars -- then it's a good thing.

Cash stuffing advantage No. 2: Setting goals

Another trend in the TikTok videos about cash stuffing is that many of these Gen Zers like to use multiple cash stuffing envelopes for specific goals. They're stuffing money into a wide range of categories, some short-term like "paying off my phone" or longer-term like "saving for a deposit on a new apartment." Cash stuffing can be a useful way to salt away some extra cash for specific purposes, like a vacation or fun spending money.

Cash stuffing advantage No. 3: Flexible, targeted spending (and saving)

A big advantage of cash stuffing as a budgeting method is that it's flexible. This makes it a good choice for gig workers, people who get paid in cash, who work multiple jobs, have inconsistent work schedules, or otherwise have paychecks that aren't the same from month to month.

Cash stuffing drawbacks: Why you might want to keep your money in the bank

I'm always in favor of people getting excited about personal finances and saving money. But cash stuffing also poses a few big drawbacks and possible risks.

Cash stuffing disadvantage No. 1: Your money could get lost or stolen

Do you really want to have hundreds or thousands of dollars sitting in your home? What if your cash gets lost, stolen, or destroyed in a house fire or natural disaster? Hopefully none of those misfortunes will happen to you, but if they do, you're out of luck.

Keeping your money in the bank gives you FDIC insurance. Even if the bank gets robbed, burns down, or goes out of business, your money is still safe. The safety of a bank account cannot be surpassed by cash stuffing.

Cash stuffing disadvantage No. 2: Binders and envelopes don't pay interest

If you're saving for a long-term goal, or even a shorter-term goal like a vacation or a new car, why not keep your money in a high-yield savings account? (Maybe the cash stuffers are already doing this after they sort their cash from each paycheck; I hope so!)

You deserve to earn interest on your savings. Putting your savings in an interest-bearing savings account can help your money grow faster -- and watching that number get bigger each month feels really good.

Cash stuffing disadvantage No. 3: Paying in cash doesn't build credit

If you want to build credit history and improve your credit score, you can't just use cash -- you need credit cards or other credit accounts. If you want to use cash stuffing to get your money organized each month and make sure you have enough for your bills, that's great. But consider using credit cards to actually make some payments and increase your FICO® Score.

Bottom line

If cash stuffing can help you feel more confident about controlling your monthly spending, then go for it! But be aware of the possible risks and drawbacks. Even the most passionate Gen Z cash stuffers can benefit from a bank account, credit cards, budgeting apps, and other convenient features of the financial system.

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FAQs

Pros and cons of cash stuffing

Bottom line

Cash stuffing might appeal to consumers who prefer simplicity or have problems with impulse control. But the risk of having all that cash around — not to mention missing out on interest and card rewards — should make you think twice before labeling all those envelopes.

Cash stuffing might also be useful for those who want to reduce their credit card spending. By having some or all of your spending money in cash, you're less likely to make credit card purchases, delay paying them off and add to your credit card bill.

Inflation decreases the value of any money you hold in cash.

Inflation, aka rising prices over time, reduces your purchasing power. That $10 bill could have bought you a whole sandwich a few years back. Today, the sandwich costs $12.50 (if you're lucky), so the same $10 bill only buys you 80% of the sandwich.

The goal of cash stuffing is to only spend what's in your envelopes for the month. Cash stuffing envelopes can help you stick to a monthly budget and be more intentional with your spending.

It's a good idea to keep enough cash at home to cover two months' worth of basic necessities, some experts recommend. A locked, waterproof and fireproof safe can help protect your cash and other valuables from fire, flood or theft.

Inability To Achieve Long-Term Financial Goals

The longer you hold onto a massive sum of cash, the more you'll notice the significant impact it has on your financial future. Alva said many individuals find themselves without enough funds to retire and reduced purchasing power for their long-term goals.

While it is legal to keep as much as money as you want at home, the standard limit for cash that is covered under a standard home insurance policy is $200, according to the American Property Casualty Insurance Association.

“You should keep an amount of cash at home that you are comfortable with in case of emergency. This should be no more than a few hundred dollars, or whatever amount makes sense for your lifestyle and budget,” suggested Evan Tunis, president of Florida Healthcare Insurance.

If you want to store cash at home, you might consider keeping it with copies of your important paper documents in a waterproof, fireproof safe.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.

In its simplest form, cash stuffing means that after paying your fixed bills (like your rent and phone plan) and setting aside money for savings each month, you divide the rest of your income up as cash. Then you “stuff” the cash into envelopes labeled with various spending categories.

The concept is simple: Take a few envelopes, write a specific expense category on each one — like groceries, rent or student loans — and then put the money you plan to spend on those things into the envelopes. Traditionally, people have used the envelope system on a monthly basis, using actual cash and envelopes.