The term cash stuffing refers to the practice of keeping large amounts of cash in unusual or unconventional places, such as inside objects, furniture, or even in envelopes. This activity is done in order to hide or protect money of possible theft, confiscations or taxes.
When it comes to savings, they alone have advantages compared to not having any money saved, because they give you some protection against debt and allow you to have an emergency fund to safeguard your financial stability. However, is keeping your money in envelopes the most appropriate option for your personal finances? The question is whether the envelope savings mechanism is the best choice to manage your personal finances. Here we tell you the advantages and disadvantages of doing so.
How to perform ‘cash stuffing’ to save money?
The technique involves separating the cash into different categories (food and household, transportation, leisure, etc.) and labeling each of the envelopes or containers with the corresponding name. The desired amount is then placed in each envelope or container for a clear record of money available and money spent in each category.
What are the ‘pros’ of cash stuffing?
Some perceived advantages of cash stuffing include:
- Security: By keeping cash in non-traditional locations, you can reduce the likelihood of theft or loss compared to keeping it in a bank account or in a more visible location.
- Privacy: Cash stuffing allows you to maintain the anonymity and confidentiality of assets, since no financial information is electronically recorded or shared with third parties.
What are the ‘cons’ of cash stuffing?
However, there are also significant disadvantages associated with cash stuffing:
- Risk of loss: If money stored in envelopes or unusual places is lost or damaged, there is no warranty or protection to cover such losses.
- Lack of performance: Money held in cash does not earn interest or financial returns, which means that the opportunity to increase its value over time is lost.
- Legal risk: Depending on the jurisdiction and local regulations, cash stuffing can be considered tax evasion or money laundering, which carries legal risks and criminal consequences.
MORE NEWS:
High level Team of young journalists whose objective is to explain the most relevant business, economic and financial news. We are passionate about telling stories and believe in citizen and service journalism.