SPRINGFIELD, Mo. – What was formerly known as the “Envelope System” has now become a TikTok and social media trend. “Cash Stuffing” has grown in popularity among Gen-Z as they search for ways to combat inflation. Financial professional Brad Pistole from Trinity Insurance & Financial Services spoke to Ozarksfirst.com about the benefits and drawbacks of the money-saving trend.
What is Cash Stuffing?
Cash Stuffing consists of dividing your income into envelopes labeled with different expense categories and stuffing them with money.
“It’s a simple way to budget and plan finances. In a practical sense, it’s a way to always know how much money you have upfront,” said Pistole. He said this trend has been around for years. Before there were banks and ATMs, people paid with cash.
Only recently has the trend made a comeback with videos under the hashtag, #cashstuffing, stacking up to 450 million views since early May.
Why has #cashstuffing become so popular?
- Rising prices for gas, food and rent sent U.S. inflation surging with record high rates this year. The latest consumer price index hit 8.5% which, although down from last month, is still elevated.
- Gen Z is particularly impacted by inflation as they hit the job market with a mountain of student loan debt.
- There are two different approaches to cash stuffing. Some will “set it and forget it” and put money away so they are not tempted to spend it. Others are more strategic, setting aside funds for specific expenses.
Pros of Cash Stuffing
“The biggest benefit is that it keeps people from using their credit cards and going into debt,” said Pistole.
- 30% of Americans have between $1,001 and $5,000 in credit card debt, 15% have $5,001 or more and about 6% or 14 million people have more than $10,000 in credit card debt.
- Compulsive spending is a hard habit to break, but cash stuffing helps you stay focused and reach your financial wins sooner.
- You are setting aside time each month to review your finances, create a budget and set specific goals.
Cons of Cash Stuffing
“As a short-term solution, cash stuffing is a great strategy to get out of debt and keep your finances on track, especially amidst inflation. But it’s not a long-term solution,” said Pistole.
- Not using a credit card doesn’t allow you to build credit, which is important for anyone applying for a mortgage, renting an apartment, opening a new credit card or getting a car loan.
- Physical cash also has one serious downside – it can get lost, stolen or destroyed and isn’t covered by homeowner’s or renter’s insurance.
- Additionally, not many videos cover saving for retirement. You need to set a goal for your long-term financial plan to set yourself up for success.
“I would recommend that you invest 10-15% of your income into a retirement savings account, like a 401(k). If you can’t put away that much, at least save enough to get the company match,” said Pistole.