What is cash stuffing, and can it help me save quickly?
Cash stuffing has become a popular budgeting hack thanks to social media platforms like TikTok. But its roots are more traditional, as it’s essentially a modern twist on the old ‘envelope method’. While it may bring to mind past generations who tucked money under the mattress, cash stuffing is far more structured and intentional.
Either way, is it a game changer for savers?
In this blog we’ll explain what cash stuffing is, how to start, the benefits and risks and how it compares to saving in an online account.
What is cash stuffing?
Cash stuffing isn’t about hoarding large sums of money at home or covering essential bills like rent or a mortgage – it’s focus is to help manage non-essential spending – think days out, social occasions and entertainment. It’s a hands-on way to control smaller expenses and build better financial habits. If you feel a little disconnected from digital transactions (pinging down your card or phone), it could give a tangible connection to spending.
It’s a method where you withdraw physical cash and allocate and store it into specific categories (labelled envelopes or cash stuffing binder for example). Once the money in a cash stuffing envelope is spent, you can’t add more cash into that category until the next budgeting period. It’s a popular method for people who struggle with impulse spending or keeping track of digital transactions.
Each envelope makes up your financial lifestyle and goals, including saving. The best use for cash stuffing is for expenses that can fluctuate or where you have more control over how much you spend. For example, categories like your food shop, dining out, or personal spending are ideal as you can make conscious choices to stay within a budget.
Cash stuffing for fixed costs and essential expenses such as rent, mortgage or utility bills are better managed through direct debits or standing orders. It also reduces the risk of having large sums of money at home. If part of your cash stuffing motivation is to save more, it’s also a good idea to regularly deposit this into a savings account to keep it secure and earn interest.
How cash stuffing can help you save quickly
Whether you’re new to budgeting or have a savings goal in mind, cash stuffing can be an effective way to help you get there and here’s how:
- Visibility of spending - Seeing your cash physically can help put into perspective your financial lifestyle and offer visual accountability for how you spend your money. Knowing you’ll be handing over a crisp note can give you moments pause for consideration, something we don’t always do if we’re just swiping a card or phone.
- Builds budgeting behaviour - Once the money in your cash stuffing binders is gone, it’s gone. There’s no option to overspend or get yourself into debt. This forces you to meet budgets, potentially cut costs and stick to your financial goals.
- Works for your lifestyle - Cash stuffing is built on the idea that it helps savers to meet their own financial targets. By cash stuffing you’re allocating the funds for specific savings goals, such as a holiday pot or a new car. Being able to watch your progress, and cash stuffed envelopes, grow, can keep you motivated to stay on track.
- Encourages structured savings - Cash stuffing could work well for budgeting or short-term goals, but it’s important to remember that it’s not a replacement for secure, long-term savings. For larger sums, many cash stuffers deposit the money into a savings account regularly – this way they can earn interest and keep their funds safe.
How do I start cash stuffing?
Good news for anyone interested in cash stuffing, it’s straightforward and requires minimal resources:
- Understand your budget
First, work out your income vs outgoings each month. Next, break expenses into categories such as rent, food, travel and entertainment. If you need a refresher on how to set a budget, you can find top budgeting tips here.
- Label your envelopes, binders or plastic wallets
Decide where is best to stuff your cash. You can use envelopes, buy purpose made cash stuffing binders or simply pick up plastic wallets from the post office.
Write on each cash stuffing envelope the amount you’re putting in it so you can keep track of spending and ensure you have enough to see you through the budgeting period- whether it’s a week, month or alternative period. You’re not putting equal amounts in each envelope but rather the amount you’ve designated for each category.
- Stuff your envelopes
Pop to your local bank and withdraw the total you’ll need to stuff each envelope. As you make payments, make sure you’re pulling cash from the corresponding envelopes. This works to visually remind you how much you’re spending and how much you have left. Remember, cash stuffing only works if you bring that cash with you when you’re out and about and spending.
- Track your spending
Record how much you spend from each envelope – at the start it can be a learning curve, so don’t worry if you need to adjust your budget a little for the next budgeting period.
Advantages of cash stuffing
- Visibility of spending
Probably the key benefit of cash stuffing is the psychological change of holding cash in your hand before your part with it in return for something else. For savers, seeing your money physically grow can be more motivating than watching a digital balance.
- Good for budgeting
With instant control over your cash, you’re immediately looking at your money within budgeting categories and that could help manage money better going forward. As you’ve no option to overspend as you could with a credit card or overdraft, there’s no chance of overspending if you do it correctly.
Disadvantages of cash stuffing
- Security risk
Always be mindful of the risks of having large sums of cash, either at home or when you are out in public. There is a huge risk if you lose it, or have it stolen – there is also no guarantee you’ll recover it.
- No interest earned
If you’re saving, having your money in an account such as a Cash ISA or easy access savings account means you can earn interest on your savings. Cash stored at home won’t earn any interest.
- Inconvenience
The whole process of cash stuffing, although simple, can be cumbersome. Withdrawing money, stuffing envelopes and paying for everything in cash can feel onerous, especially for large spending amounts and savings goals.
Advantages of saving in an online account
- Safe and secure
A savings account isn’t just there to look after your wealth, it’s also keeping your money safe. Funds are insured and protected against theft or loss. With Hodge, your money is protected by the Financial Services Compensation Scheme (FSCS), meaning 100% of the first £85,000 you have saved is protected (per financial institution, not per account). Find more about FSCS protection here.
- Easy access
A selling point for savings accounts can be they’re easy to access. You can transfer funds quickly and track your savings through mobile apps. You can also set up automated, recurring transfers, making your savings effortless and efficient.
- Earning interest
Online savings accounts typically offer interest, helping your money grow over time. If you’ve a savings goal or just looking to put money aside for the future, knowing it’s working hard for you can be a long term win.
Disadvantages of saving in an online account
- Easier temptation
The convenience of online accounts, transferring money from savings and the ease of credit card spending may tempt savers to dip into savings or overspend unnecessarily.
- Physical connection
Digital balances can feel less real than having physical cash in your hand. This can make it harder for some to stay disciplined and motivated to build up the saving pot.
So, which is right for you?
The choice between cash stuffing and saving in an online account depends on your financial habits and goals.
Cash stuffing: ideal for short term goals and budgeting – a hands-on approach if you’re overspending.
Online savings: Better for long term savings, earning interest and keeping your money secure.
You may want to consider a combination – cash stuffing for short-term goals and budgeting, and an online account for long-term savings.
If you’re still exploring how to save, read our Quick and easy ways to save each month blog.
