TikTok is not just a place to learn viral dance moves or watch comedy bits; it’s become a surprisingly vital hub of Gen Z personal finance. One of the most popular Gen Z money trends on TikTok is something that my generation used to call “the envelope method” — but the young folks are calling it “cash stuffing.”
With cash stuffing, Gen Zers on TikTok (and in real life) are “stuffing” cash into dedicated categories of envelopes and binders to help pay bills and pay off debt. Cash stuffing is a visually engaging way to look at, feel, count, and allocate your money. For people who struggle with impulsive spending, or who fear racking up credit card debt, cash stuffing can give a sense of calm and control.
Let’s look at the biggest potential risks of cash stuffing, and how you can have fun with this Gen Z TikTok money trend, while also protecting your personal finances.
Risk No. 1: Cash can get stolen
I am too old to participate in TikTok trends, so I might be out of touch by raising this question, but: are cash-stuffing influencers actually keeping (some) money in the bank? I hope so! If you have hundreds or thousands of dollars in your home, in envelopes in your car, or being carried with you in a binder, you are at risk of losing that money.
Cash gets stolen, lost, misplaced, and even destroyed by fire or natural disasters. Bank accounts do not. Even if you forget your bank account password or ATM PIN, the bank will help you regain access to your money.
Even in the worst-case scenarios of being a bank customer, if your bank goes into a downward spiral and fails and goes out of business, your money is protected (up to $250,000 per qualifying account and account holder) by FDIC insurance. Cash stuffing doesn’t have FDIC insurance.
By all means, use cash stuffing and pay with cash as much as possible if that works for you and helps you feel better about your budgeting. But carrying too much cash, and keeping too much cash outside of the bank, can end up costing you more than you can bear.
Risk No. 2: Cash-stuffing binders don’t earn interest
If you’re saving money for an emergency fund, a big purchase, or any other short-term goal, your cash should be in the bank, in a high-yield savings account, earning interest. Cash stuffing can be a useful way to sort out your paycheck and literally see (and feel) where your money is going each month. But once you’ve categorized your expenses, put your money in a savings account.
If you don’t have much cash saved, you might wonder if it’s “worth” opening a savings account. Even if you only have $100 of savings, you worked hard for that money. And you deserve to earn interest on every dollar you save. And you might even find that watching your money earn interest feels inspiring and empowering, so you’ll want to keep up the momentum and save more.
Risk No. 3: Cash transactions are bad for budgeting apps
There’s no one “right way” to budget. Some people might want to use a spreadsheet or write down all their monthly purchases on paper. But one of the best ways to see where your money goes is to use easy, affordable budgeting apps. And cash stuffing makes it harder to do this.
“Digital transactions offer easy reporting capabilities that cash transactions don’t,” said Yuval Shuminer, CEO of personal finance app Piere (piere.com). “Cash budgeters must remain diligent in recording their spending to maintain visibility into where their money is going.”
Risk No. 4: Cash stuffing doesn’t build your credit score or earn reward points
Some people turn to cash stuffing because they’re afraid of credit card debt, don’t have established credit history, or have had a bad experience with credit cards. But if you’re handling all of your bills and everyday spending with cash, you are ultimately missing out on valuable chances to build credit. The best credit cards can also help you earn rewards on everyday purchases, like cash back or travel.
Cash transactions don’t get reported to credit bureaus. They don’t build credit history. Someday if you want to buy a car or buy a home, unless you’re history’s most frugal cash-saver, you’re going to want to qualify for affordable loans — and having a good FICO® Score can save you significant money on loan interest for the rest of your life.
Bottom line
Cash stuffing can be a good way to get more acquainted with your money and feel more in charge of your monthly budget. But if you are making all of your purchases with cash and not taking advantage of the benefits of bank accounts, credit cards, and other financial tools, you could be vulnerable to big risks and missed opportunities.
