"Cash stuffing" is all over TikTok — but is it a good way to budget your money?

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Budgeting can be difficult and time-consuming. "Cash stuffing," also known as the envelope method, has emerged in recent years as a straightforward money management tool that enables users to put hard limits on their spending.

It's found increasing popularity on TikTok, where clips with the hashtags "#cashstuffing", "#cashenvelopesystem" and "#cashenvelopes" have garnered more than 3 billion views combined.

A big part of cash stuffing's appeal is its simplicity: Every month, adherents simply divvy up their funds among envelopes devoted to different spending categories. But is this low-tech technique a good budgeting strategy?

Below, CNBC Select explores the pros and cons of cash stuffing, as well as alternatives that offer more bang for your buck.

• What is cash stuffing?
• Benefits of cash stuffing
• Risks of cash stuffing
• Alternatives to cash stuffing
• Bottom line

Cash stuffing involves putting money in envelopes earmarked for various spending categories — like rent, groceries, entertainment and gas. Once you use up all the money in a given envelope, you aren't allowed to spend any more in that category until the following month.

The idea of budgeting by physically allocating cash into spending categories is nothing new: Personal finance personality Dave Ramsey has been touting his envelope system for nearly 20 years. But cash stuffing has taken off with Gen Zers and millennials, some of whom are facing credit card debt and inflation for the first time.

While other budgeting methods merely track your spending, cash stuffing physically prevents you from going over budget. Once an envelope is empty, you can't spend any further. That makes it useful if you're an impulse shopper or find yourself coming up short every month.

With cash stuffing, you can better visualize your spending habits and make adjustments. You can also avoid credit card interest and overdraft fees, which can add up quickly.

There's no two ways about it: Having large amounts of cash at home is risky. If you were robbed or there was a fire, that money would be gone forever. (Even a disobedient dog could cost you thousands.)

Say goodbye to online shopping, too. Not just for clothes and other merchandise, but movie tickets and meals. And all those trips to the ATM and cash register are time-consuming.

Paying in cash also means you won't enjoy the purchase protection and rewards programs most credit cards come with. The American Express® Gold Card, for example, offers 4X Membership Rewards® points at restaurants and U.S. supermarkets (up to $25,000 in purchases per year.) and 3X on flights booked directly with airlines or through Amextravel.com.

Members who link their card to the latest version of the Uber app can also get a credit of up to $120 in Uber Cash annually (up to $10 per month) to use on Uber rides and Uber Eats orders in the U.S.

Most importantly, using the envelope method means that money won't be accruing any interest. The Milli Savings Account is a high-yield savings account with a 5.5% annual percentage yield. There's no minimum opening deposit and no maintenance or overdraft fees.

There's even a budgeting feature that lets account holders distribute money into up to five different "jars" and calculate how much they need to meet that financial goal.

Relying on paper money may also encourage irresponsible spending. A 2023 analysis of more than 118,000 transactions found shoppers tended to use cash for purchases they felt guilty about or didn't want to think about later, since credit cards leave more of a trail.

If you want to work on your budgeting but don't want to give up the ease and perks of credit cards, you have some options. CNBC Select's choice for the best cash-back credit card, the Chase Freedom Unlimited® card comes with the Chase Spending Planner, which breaks down your spending into categories and lets you track daily and monthly spending.

The card also offers 6.5% cash back on travel purchased through Chase Travel℠, 4.5% cash back on drugstore purchases and dining at restaurants, including takeout and eligible delivery service, and 3% on all other purchases (on up to $20,000 spent in the first year).

If you just want a money management tool, the You Need a Budget (YNAB) app is a virtual version of the envelope method. Users allot funds to a spending category, or "job," until all of their available money is assigned. There's a 34-day free trial period and you can link accounts and set spending goals.

Cash stuffing might appeal to consumers who prefer simplicity or have problems with impulse control. But the risk of having all that cash around — not to mention missing out on interest and card rewards — should make you think twice before labeling all those envelopes.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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