Why Gen Z and Millennials are returning to ‘cash stuffing’ to manage their money

According to the 2021 Payment Markets Report by UK Finance, in 2020, 83% of people in the UK were making contactless payments. But as the cost of living crisis continues, new money management strategies are being trialled across the UK, including ‘cash stuffing’, which can help people take more control over their spending to stay on budget. What better way to know what you’re spending than to handle physical cash?

What is cash stuffing?

A simple explanation for cash stuffing is allocating monthly budgets for certain expenses and putting the corresponding amounts of cash into envelopes. The idea behind cash stuffing is based on the accounting concept, ‘zero-based allocation budgeting’. By starting from a ‘zero base’ at the beginning of each budget, you can create an effective process for analysing and deciding where to allocate your funds. Cash stuffing makes the reality of personal finance a reality, enforcing a level of discipline that lots of people welcome, especially in hard financial times.

Common cash stuffing categories include rent/mortgage payments; utility bills; children; car payments/insurance; fuel; food shopping; holidays; eating out; personal care; or celebrations.
Cash stuffing also helps rein in those whose habits are prone to impulsive purchasing, keeping credit spending off limits. An empty envelope means that once the money has been spent, it’s gone. While it might be tempting to borrow from a different envelope when you run out of money, that will leave you short for other essential expenses.

Why is cash stuffing rising in popularity?

Young people in particular are turning their back on contactless payments and taking a more traditional approach to personal finance. The trend of ‘stuffing cash’ into envelopes has apparently racked up more than 1.2 billion views on TikTok under the #CashStuffing hashtag. And popular accounts dedicated to the trend – like @cashstuffingfix – have gained over half a million followers. A particularly popular account, @baddiesandbudgets, has over 750K followers and 6.8 million likes overall on videos related to cash stuffing and budgeting.

Gen Z and Millennials are not exempt from the current cost of living crisis, and with bills, rent and mortgages increasing, new ways are being sought to track spending. As the situation is not looking to improve any time soon, many young people are looking to proactive methods to help manage their finances.

Looking back, Gen Z and Millennials entered the workforce during or shortly after the global financial crisis of 2008, which resulted in a slow job market, limited career opportunities and lower starting wages. These early setbacks have had a long-lasting effect on their financial stability and ability to build wealth.

An additional factor is substantial student loan debt with the cost of higher education rising significantly over the years. Many young people had to take on significant loans to finance their degrees or further education. Student loan debt can hinder the ability to save for the future, invest or make major life decisions, such as buying a home. High rent prices also contribute to financial strain, making it more challenging to save for a house deposit.

The pros and cons of cash stuffing

By mentally allocating specific amounts to different spending categories and adhering to those limits, you can maintain better control over your expenses. The cash stuffing method gives younger consumers a better sense of how much money they have left over each month for leisure spending. When using cash, you physically see the money leaving your hand, which creates a psychological impact. But like any budgeting method, there are both benefits and drawbacks, and the effectiveness of cash stuffing depends on the determination and willpower of the individual.

The main benefit of cash stuffing is an increased awareness of spending, forcing you to stop and think about the outlay of your hard-earned cash, to hopefully limit impulse spending. It gives you time to question whether it’s a planned for and necessary item, and to consider the consequence if it were not purchased.

Cashless transactions are recorded instantaneously, allowing you to track your spending in real time. This visibility allows you to make immediate adjustments to your budget if you notice any potential issues.

Using cash as a visual and physical aid can instil good budgeting discipline, and furthermore, the competitive aspect can encourage more financially responsible behaviour. Another key advantage is that it is a simple, cheap budgeting tool.

However, while it’s helping people to keep a close eye on their spending and saving habits, it can be easy to override the system and spend on a debit or credit card to supplement the cash budget that’s previously been set. In order to restrict overspending effectively, you can choose to leave debit or credit cards behind when you go food shopping or on a night out, only taking your allocated cash with you.

For some, carrying cash can cause anxiety about theft or loss, as can leaving large amounts of cash at home. Another downside is that cash doesn’t have the same financial protection as credit and debit cards.

AXIS by NoteMachine – access to cash

AXIS hubs enable consumers and businesses to continue to use banking services with their bank of choice, despite the closure of many high street banks. AXIS hubs offer access to cash via ATMs, as well as multi-bank deposits and face-to-face banking services.

In 2020, the number of cash payments made in the UK fell by 35%, meaning that cash was used for 17% of all payments in the UK. However, cash still remains the second most frequently used payment method behind debit cards. The 2018 Access to Cash Review concluded that whilst cash is declining, the majority of consumers value its availability and, for many, it remains a necessity.

In conclusion

Overall, the principles of cash stuffing can still offer valuable structure to budgeting efforts. By setting clear spending limits and tracking expenses, you can work towards your financial goals more effectively.

To find out more about AXIS by NoteMachine, visit www.notemachine.com/axis, or email Rebecca Browne at [email protected].

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