Is the Cash Stuffing Trend on TikTok a Good Way to Manage Your Money?

It's the Gen Z version of the envelope method.

Cash stuffing is the latest financial trend to go viral on TikTok. Videos of people dividing their cash into labeled envelopes have racked up hundreds of millions of views and convinced many followers to do the same.

This budgeting method has helped people get out of debt and save more money, but it's not without its flaws. If you've been thinking about giving cash stuffing a try, learn about the pros and cons first to decide if it's right for you.

What is cash stuffing?

Cash stuffing is when you put your money in containers that are each labeled with a specific expense or financial goal. For example, you could have a container for your emergency savings, another for groceries, one for a vacation fund, and so on. You only use money in a container for that specific purpose.

When you get your paycheck, you divide it up among these containers. The amount you put in each one depends on how much your bills cost and how much you want to save for each goal. This is known as giving each dollar a job, because you assign a purpose to every dollar you earn. It's the same method used by the popular budgeting app You Need a Budget.

If this sounds familiar, it's because cash stuffing is the same thing as the envelope method. Envelope budgeting has been around for years, and the only change with cash stuffing is that some people use different types of containers.

The good and bad of cash stuffing

Giving each dollar a job, like you do with cash stuffing, is a great way to manage your money. This type of budgeting encourages you to think about your different financial goals and save toward them. You probably have lots of different things to save toward, like a down payment on a home, travel, holiday gifts, etc. It's much easier to work on different savings goals and track your progress when you have a separate savings envelope for each one.

Cash stuffing also helps you spend less. Because you can only spend what you have in your envelope for that expense, it keeps you from going over your budget. In addition, some studies have shown that consumers spend less overall when paying in cash.

There is, however, a serious drawback to cash stuffing. Keeping so much cash on hand isn't the best idea, for a few reasons:

• You won't earn interest on this money. The interest rates on high-yield savings accounts have risen quite a bit this year, but you'll miss out on that with your cash savings.
• You won't earn rewards on your purchases. If you use rewards credit cards to pay your bills, you can earn cash back or points on your spending. You need to be careful to avoid overspending and pay your credit card in full every month.
• There's a greater risk of losing your money. Money you keep in a bank account is covered by FDIC insurance, and you can always get another debit or credit card if you lose yours. If all that cash you have is lost or stolen, it's gone for good.

Should you try cash stuffing?

If you want to improve your money management, cash stuffing is a good option, with one key adjustment. Instead of stuffing cash in envelopes, go digital.

Most banks will let you set up sub-accounts. That means you can create multiple accounts and label them for financial goals. You could have your emergency fund account, your rent money, your travel savings, and accounts for everything else in your life. Each of these accounts serves the exact same purpose as an envelope would in cash stuffing.

It's admittedly not quite as TikTok-worthy. Seeing actual cash get moved around is a lot more interesting than seeing people transfer money around their bank accounts. But keeping your money in a bank is much safer and allows you to earn interest on it. You still get the benefits of cash stuffing, just without the drawbacks.