Are you ‘cash-loading’ to save money in 2024? Watch out for these 4 dangers

TikTok isn’t just a place to learn popular dance moves or watch comedy. This has become an incredibly important hub for Gen Z personal finance. One of the most popular Gen Z money trends on TikTok is what my generation used to call the “envelope method,” but younger people call it “cash stuffing.”

With Stuffing Cash, Gen Z 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 Stuff is a visually appealing way to see, feel, count, and allocate your money. For people who struggle with impulsive spending or fear mounting credit card debt, stocking up on cash can give them a sense of security and control.

All of these benefits of cash filling can be a great way to save money, focus on budgeting, and get motivated to improve your personal finances. However, this method also has some drawbacks and risks.

Let’s take a look at the biggest potential risks of stuffing your cash and how you can protect your personal finances while enjoying this Gen Z TikTok money trend.

Risk number one: Your cash could be stolen.

I’m too old to participate in TikTok trends so I may be out of touch by posing this question, but are influencers stuffing their cash actually keeping (some of) their money in the bank? I hope! If you have hundreds or thousands of dollars sitting at home, in an envelope in your car, or carrying around in a binder, you are at risk of losing that money.

Cash can be stolen, misplaced, misplaced, or even destroyed in a fire or natural disaster. Bank accounts do not. Even if you forget your bank account password or ATM PIN, your bank will help you get your money back.

Even in the worst-case scenario of being a bank customer, if your bank declines and fails and goes out of business, your money is protected by FDIC insurance (up to $250,000 per eligible account and account holder). Cash stuffing is not FDIC insured.

By all means, use cash top-ups and pay in cash as much as possible if it suits you and helps you feel better about budgeting, then go for it. But carrying too much cash and keeping too much of it outside the bank can end up costing you more than you can afford.

Risk No. 2: Cash-filled binders do not earn interest.

If you’re saving money for an emergency fund, a big purchase, or other short-term goals, you should put your cash in a bank, high-yield savings account to earn interest. Cash topping up can be a useful way to organize your paycheck and literally see (and feel) where your money is going each month. But once you’ve categorized your expenses, put the money in a savings account.

If you don’t have a lot of cash saved, you may be wondering if it’s “worth” opening a savings account. Even if you only have $100 saved, you worked hard for that money. And you are entitled to interest on every dollar you save. And seeing your money earn interest may feel inspiring and empowering, making you want to keep the momentum going and save more.

Risk #3: Cash transactions are bad for app budgeting.

There is no “right way” to budget. Some people may like to use a spreadsheet or keep track of all their monthly purchases on paper. But one of the best ways to see where your money is going is to use an easy and inexpensive budgeting app. And filling up on cash makes it harder to do this.

“Digital transactions offer easy reporting that cash transactions don’t,” said Yuval Shuminer, CEO of personal finance app Piere (piere.com). “Cash budgeters must diligently record spending to maintain visibility into where their money is going.”

Risk No. 4: Stuffing cash won’t boost your credit score or earn you reward points.

Some people turn to cash top-ups because they are afraid of credit card debt, have no credit history, or have had a bad experience with credit cards. But if you pay all your bills and everyday expenses with cash, you’ll ultimately miss out on a valuable opportunity to build your credit. The best credit cards can also help you earn cashback or rewards for everyday purchases like travel.

Cash transactions are not reported to credit bureaus. They do not build a credit history. If you want to buy a car or a house someday, you’ll want to qualify for a cheap loan, unless you’re one of the most frugal cash savers of all time. And having a good FICO® score can save you a lot of money. Take out a loan with interest for life.

conclusion

Filling up your cash register can be a great way to become more money conscious and feel more responsible for your monthly budget. But if you make all your purchases with cash and don’t take advantage of bank accounts, credit cards, and other financial tools, you could be exposing yourself to great risk and missing out on opportunities.

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