What Is Cash Stuffing?

car keys on the table next to a jar of coins.

Cash stuffing is a budgeting strategy that’s become trendy thanks to TikTok.

Cash stuffing involves placing cash in envelopes — or glass bottles, binders, or other containers of choice — for specific spending categories. For instance, you might plan out exactly how much you can spend each month on groceries, household supplies, gas, and other cash stuffing categories, and then stash the corresponding amount of cash in envelopes or containers designated for each one.

Cash stuffing can be a useful approach for people who want to put strict limits on their spending and avoid charging too much on credit cards. At the same time, cash stuffing envelopes have certain downsides compared to digital banking. Still wondering, what is cash stuffing?

Read on for more information how cash stuffing works, including both the pros and cons.

Where Did the Cash Stuffing Trend Come From?

Opting for cash over credit has long been a strategy in the budgeting world, but it’s recently picked up steam again due to viral TikTok videos. TikTokers are sharing the ways they save cash in envelopes, binders, glass bottles, shoes, and other containers.

Thanks to its popularity on TikTok, cash stuffing has become especially popular with Gen Z, who are using this method to stick to their budget and save money fast. The rise of cash stuffing may also be a response to inflation and the increase in prices of consumer goods. Cash stuffing is one way to keep up with rising prices and make sure you’re not spending beyond your means.

How Does Cash Stuffing Work?

When you practice cash stuffing, you use cash, rather than credit, to pay your major expenses. The idea is that using money will prevent you from the type of overspending that’s so easy to do with a credit or debit card. Since cash is tangible, you may get a clearer sense of how much you can spend each month without going in the red, which could help you reach your savings goals. Here’s how to do it.

1. Determine how much cash you need for your cash stuffing categories

To get started with cash stuffing, you’ll first need to figure out how much cash you need on hand for your major spending categories. There may be some bills that you can’t pay in cash, such as rent or your phone bill. But for other expenses, like groceries, gas, and household supplies, come up with an estimate of how much you need each month.

One guideline is the 50/30/20 approach to budgeting, which suggests spending 50% of your budget on needs, 30% on wants, and 20% on savings. You might also use zero-based budgeting, which involves assigning a purpose to every dollar you make each month, whether that’s paying for utilities or funneling money into your savings account.

2. Label envelopes or other containers

Your next step is choosing the containers that you’ll put your cash in. You can use anything, but envelopes or binders are likely the easiest option.

Some TikTokers stash their cash in a glass bottle and break it when they’re ready to use the cash. But if you’re not looking to rack up likes and views, taking a simpler approach may be best. Make sure to label each envelope with its designated spending category to stay organized.

3. Gather the cash you need

With cash stuffing, you typically pull together the amount of cash you’ll need at the beginning of each month. Alternatively, you could take out cash from each paycheck, which you might receive on a biweekly schedule. Dole out the appropriate amount of cash into each envelope you’ve labeled.

4. Stick to your budget

The real purpose of cash stuffing is to budget your money and not spend all the cash at once. As the month goes on, make sure you’re following your goals and not emptying out the envelopes too quickly.

5. Repeat the cash stuffing process

If the cash stuffing method works for you, you can keep doing it. Simply adjust your monthly budget as needed. If you discover you’re spending too much on certain bills, consider looking for a more affordable service provider. Or if you find yourself overspending on non-essentials, try to minimize the amount that goes toward these things if you can. You might also try cutting expenses to pay off debts.

Pros of Cash Stuffing

Cash stuffing is popular for a reason. Here are some of its major advantages.

Be more aware of what you’re spending

When you swipe credit cards, it’s easy to feel disconnected from the amount of money you have. Using cash gives you a tangible sense of how much money you have each month and how much you’re spending.

According to an MIT study, handing over cash at checkout feels more painful than using your credit card. This emotional connection to your cash can help you stick to your budget and only pay for what you can afford right now. That way, you’re not incurring credit card debt to pay off.

Check your budget regularly

When you use cash stuffing, you’ll be aware of your budget since you have to set aside money monthly or biweekly. Without cash stuffing, it’s all too easy to create a budget and then forget to look at it or check your average savings for months.

Feel less stressed and more in control of your finances

With cash stuffing, you can clearly see how much money you have to spend each month. Taking this proactive, hands-on approach to your spending and saving can reduce stress and give you a greater feeling of control over your cash flow.

Cons of Cash Stuffing

At the same time, there are some potential downsides to using cash stuffing. Consider these drawbacks before you commit to this budgeting approach.

Stuffing cash can be risky

Saving large amounts of cash requires a great deal of organization. If you’re stashing cash in random spots around your home, you could end up forgetting where you put your money. There’s also the risk of losing your cash to theft, fire, or flood. Even if you have homeowner’s or renter’s insurance, you may not be able to recoup the full amount. When you deposit your money in a bank, it’s FDIC-insured for up to $250,000, so you don’t have to worry about losing it.

Your cash won’t earn interest

Saving your money in a bank can also be beneficial because you could earn interest on it. While the interest on checking accounts tends to be fairly low, some high-yield savings accounts come with APYs of 3.00% or higher. By keeping your money in cash stuffing envelopes, you miss out on the opportunity to earn interest, which could help your savings keep up with inflation. You can explore high interest savings accounts to see if one might be a good fit for you.

You can’t pay for everything in cash

Finally, cash stuffing probably won’t work to pay all your bills. It might not be possible to pay your phone, credit card, or student loan bills in cash, for instance.

How to Evaluate if Cash Stuffing Envelopes Is Right for You

If you’re looking for a way to curb your spending, cash stuffing is worth a try. It gives you a concrete sense of your spending and saving every month.Plus, it forces you to identify exactly how much you spend each month on groceries, bills, and other expense categories. Using cash stuffing could make managing your money less stressful and help you avoid racking up credit card debt. On the flip side, cash stuffing envelopes might not be the best approach if you prefer digital banking. If you enjoy the ease and convenience of managing your money online, consider using a budgeting app instead.

The Takeaway

Creating and following a monthly budget can be a game-changer when it comes to managing your finances. By identifying your monthly income and expenses, you can make sure you don’t spend past your means and find opportunities to save.

For many people, cash stuffing envelopes offers an effective approach to monthly budgeting. At the same time, it’s not the only way to budget your money. Nor does it have to be mutually exclusive with banking. You can have a bank account and practice cash stuffing, if that’s what works for you.

If you’re ready to explore the option of opening a savings account, Lantern can help you find one with the best rates. In our online marketplace, you can quickly compare rates and balance minimums.

Frequently Asked Questions

How do you pay your bills with cash stuffing?

With cash stuffing, you set aside the specific amount of cash you need for different spending categories each month into labeled cash stuffing envelopes or containers. Then, you use that cash to pay your bills and other expenses. You might not be able to pay every bill in cash, since some service providers may require checks or digital payments. However, you can use the cash stuffing system for any expenses that accept cash as payment.

Is stashing cash a good idea?

Stashing cash may be a good idea if you want to take control of your budget and avoid overspending on credit cards. At the same time, cash stuffing has some downsides, including the risk of theft and the fact that you can’t earn any interest on your money, the way you would with a bank account. Weigh the pros and cons to determine whether cash stuffing is the most effective budgeting strategy for you.

What is one potential downside of using cash envelopes?

One potential downside of using cash envelopes is that your cash won’t earn interest the way it would in a bank account. Some high-yield savings accounts come with APYs of 3% or higher.

Featured Image Credit: AntonMatyukha /Depositphotos.com.

This post originally appeared on Lantern Credit, and was syndicated by Ash & Pri.

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Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).