Could cash stuffing be your saving grace?

Cash stuffing is an old-school budgeting technique that has been overhauled with trendy TikTok videos, colourful envelopes, and custom-made budget binders. 

The method helps you have firmer control over where your money goes. We explore its mechanics, and whether it’s an option you should consider.

Tip: Understanding what you spend your money on is the first step in budget planning. Our budget calculator is a handy tool that may assist you with this.

Why resort to cash stuffing?

According to DebtBusters’ Debt Index for Q3 2023, South Africans are using 65% of their net income to service their debt. Further, Deloitte’s South African investment management outlook for 2023 notes that consumers are saving a dismal 0.5%.

“People want more control over their finances,” says Sean van Zyl, a certified financial planner at Old Mutual Personal Finance. “One way to step in is to use a budget.”

This is where cash stuffing can help.

How does it work?

Cash stuffing involves withdrawing the money you will need for the month ahead, and dividing the cash into clearly marked envelopes for budget categories such as groceries, fuel, medical expenses, entertainment, clothing, electricity, mortgage payments or rent, and savings. 

“The biggest issue isn’t compiling a budget, but rather, sticking to it,” explains Van Zyl. “Cash stuffing ensures that you don’t overspend.”

Why does cash stuffing appeal to Generation Z?

Lee Hancox, head of channel and segment marketing at Sanlam, says the system’s appeal lies in the ability to physically monitor progress, and the tangible sense of organisation and control.

“Money in a bank account is abstract and may be difficult to track,” she says. “Cash stuffing encourages budgeting and saving. It serves as a prompt to make smart decisions, and to only spend what is available.”

Katlego Mei, a financial planner at Galileo Capital, agrees. “It’s easier to remain disciplined with your spending if you can see the cash decreasing. Once it’s finished, that’s it. A bank account could easily go into overdraft and leave you in debt.”

Van Zyl adds that members of Generation Z (born in the late 1990s and early 2000s) want to avoid financial hardship resulting from high debt, living beyond their means, and not having a budget in place.

What are the pros and cons of cash stuffing?

Van Zyl and Hancox list the following advantages of cash stuffing:

• It’s a simple system that requires some initial planning, but little effort to maintain
• The constant visual reminder keeps wise spending at top of mind
• It promotes accountability for each budget category
• It can be an effective tool in debt reduction
• It helps to curb impulse spending

There are also potential disadvantages:

• Cash kept in envelopes could devalue over time
• You may incur significant cash withdrawal and deposit fees 
• Cash payments are less convenient than card- and online transactions
• It’s more difficult to report on money spent
• Your money won’t earn interest or grow 
• You might miss out on banking rewards or incentives

“Using cash also poses a major security risk,” warns Mei. “If your money is stolen, you’ll be behind on your commitments. For large amounts, debit orders are the best way to go.”

Is cash stuffing for you? 

Some people have the discipline to stick to their budget without resorting to cash stuffing, but the method can help build financial discipline and reduce debt, Van Zyl says.

Mei recommends it as a tool to manage specific expense categories, such as entertainment and takeaways, where spending can easily add up.

“The system could improve your budgeting and money-management skills,” Hancox agrees. “However, it’s important to use saving and investment vehicles and ensure that a portion of your salary goes directly to those first.”

Tip: Find out more about how to reach your savings goals.