Those who opt to keep their entire monthly budget at home should also think about security. There is always a risk of theft, and many home insurers only cover a certain amount of stolen cash. Photo: dpa
The cash revival is on and thriving in unlikely places: in the minds and purses of society’s youngest spenders, driven by the latest viral budgeting trend of “cash stuffing”.
Inspired by TikTok and YouTube videos, youngsters – or Gen Zers – have particularly embraced the new fiscal lifestyle. No longer do they flash cards at the checkout, but instead pay with cash that was stuffed into envelopes or binders under strict spending plans.
The jury is still out as to whether this will last and even works: “It’s great when young people get an overview of their finances and think about how to allocate their money,” says financial adviser Josephine Holzhauser. “However, I doubt whether this method is so suitable for that.”
But for now the trend is growing, also among millennials: Researchers at personal finance platform Credello found that more than half of young adults use cash stuffing to manage their money, build savings and pay down debt.
In videos currently trending, mostly young women explain how each month they meticulously list in colourful notebooks how much money they earn and what they allot for which expenses. This may be fixed costs like rent and telephone, or variable expenses like food, entertainment or saving.
At the start of the month, they draw what’s needed from their account, some taking only enough for the variables, others cleaning out the account. They then sort the notes into small envelopes and use this to pay.
Online budget planners have long been available. But streamlined cash hoarding – not the under-the-mattress approach of our grandparents – in place of debit and credit cards is arguably new.
Not so long ago, members of the same circles even scoffed at financial prudence, bragging about their debts on social media and sharing screenshots of their negative balances. But the world’s woes are getting ever closer and austerity is the new cool.
“Many are afraid of the future in view of the current situation,” says Holzhauser. “High inflation is also causing anxiety and now they want to keep their finances under control.”
This is not always easy. “When I see a product I want to buy, the reward system is activated in the brain. The desire to buy wants to be satisfied,” says Mira Fauth-Bühler, professor of business psychology and neuroeconomics at FOM University in Essen, Germany.
“Saving, on the other hand, means doing without for the time being and brings much less pleasure. That’s why many people find it so difficult to keep their finances under control.”
That control has to be mastered by most young people: “With them especially, the control system in the brain that enables long-term planning of expenditures is not yet fully developed,” says the psychologist. “Dividing the budget and distributing cash into envelopes relieves this control system.”
It also helps that spending physical money hurts. People feel this mental pain less when paying by card, and more when cash disappears from their wallet. Impulse buying is less likely with cash.
“Those who have problems saving can use cash stuffing to learn control,” says Fauth-Buhler. But in the long run, you still also have to mature into electronic means of payment, she adds.
Those who opt to keep their entire monthly budget at home should also think about security. There is always a risk of burglary or theft and many home insurers only cover a certain amount of stolen cash. When travelling, never take all the envelopes with you, just part of the cash.
Holzhauser remains cautious about the virtues of cash stuffing. “Planning via envelopes is very complex and difficult to manage. I worry that some will lose track of it.”
Especially if they withdraw everything from their account, including money for fixed costs: “Rent money, for example, must be paid back in on time, otherwise you fall behind and slip into overdraft,” she warns.
For those who need some spending discipline, cash stuffing is at least simple: “If the envelope is empty, I can’t spend any more – that’s already helpful,” says Holzhauser.
But she would only recommend keeping money for variable costs in the envelopes, so your budget for daily shopping, clothes, trips to the cinema, or spontaneous expenses.
Longer term, she urges switching to safer methods, which means your money stays in the account, where you can keep track of it with a digital budget book via app or a simple Excel list. – dpa/Annika Krempel
