Cash stuffing is the latest budgeting hack to go viral on TikTok. If you look up the trending hashtag, you’ll find countless financial influencers sharing POV videos of them divvying up their monthly cash and tucking it into neatly labelled binders for later spending.
Budgeting out your month with cash is a great way to control spending, but its old-fashioned ways can prevent you from capitalizing on modern benefits — especially when it comes to savings.
What is Cash Stuffing?
Cash stuffing is a new spin on an old budgeting method, the envelope system.
With the envelope system, budgeters withdraw the cash they need to spend throughout the month and divide it across envelopes labelled with the spending categories. Groceries, car maintenance, and even toiletries each get a category.
Cash stuffing also relies on cash. However, cash stuffers use cute binders with divisions for each spending category rather than plain, old envelopes.
While these techniques may differ slightly in execution, they both boil down to one major tenet: using cash to budget for the month. Whether you use a binder or an envelope, this cash-based budget puts a finite limit on your spending each month.
Every Balanced Budget Needs Savings
When creating your spending categories, remember to reserve some money for savings. Your priority should be emergency savings before setting aside cash for splurges. Savings help you handle unexpected spending that might not have an existing envelope or section in your binder.
Without an emergency fund, unexpected expenses can be challenging. You might need to take out a loan online to help you cover an unexpected expense. Before you borrow any money, you’ll want to ensure you’ve found legitimate online loans from a reputable financial institution like MoneyKey.
Taking the time to compare other financial institutions with MoneyKey can help you understand your options. More importantly, it will give you an idea of how much legitimate online loans cost.
Why You Shouldn’t Put Savings in an Envelope
While it may be tempting to keep your savings in your binder to keep the cash-stuffing aesthetic, you’ll benefit more from saving it in an online account. This is especially true when it comes to long-term savings, like your retirement fund.
1. Safety
Month after month saving your cash in an emergency fund means you’ll have a lot of money on your hands. Eventually, you could have thousands of dollars in your home. It might not be wise to keep that much money in your home depending on your living situation.
2. Compounding Interest
Savings kept in an online account earns interest, which helps grow your emergency fund. If you open a high-yield account, you could earn as much as 4% APY on your deposits.
When it comes to long-term savings — or money you don’t need quick access to in an emergency — you can invest it in money market accounts, bonds, and investments.
3. Sponsorship
Registering with an account is the only way to capitalize on employer-sponsored savings accounts and retirement funds like a 401(k) or Roth 401(k).
Bottom Line:
It’s okay to have a little bit of money tucked away somewhere. Having some cash can help you if you’re stuck somewhere that doesn’t take credit or other digital payments.
However, keeping your life savings under your mattress is an outdated, unsafe, and ineffective way to save. So, if you use the cash stuffing or envelope methods, don’t give this money its own envelope; put it in a registered account.
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