Several years ago I was sitting at church fellowship with a friend who was about 25 years older than I was. I’ll call her Alice for this article. Alice pulled an envelope of cash out of her purse to buy something from a child in our church. I was surprised she carried that much cash, and she was surprised that I didn’t.
A stay-at-home mom and housewife, Alice was given a certain amount of money every month from her husband. She had an envelope for groceries and an envelope for other expenses. It was her responsibility to budget her funds, manage that cash to last until the end of the month. She didn’t have access to savings or checking accounts.
I saw this as a generational difference. Her generation was one-income families with the man controlling financial matters. Mine was the first generation where most women expected to have careers. Before the 1970s women could not have bank accounts or any kind of credit without a man co-signing. Therefore Alice bought everything with cash.
What Alice did decades ago is now a financial strategy that is followed by many people in their 20s. It’s called cash stuffing, and it is a trend found on social media. People pay bills and buy things with cash, then post videos on Instagram, TikTok, and YouTube.
I subscribe to Marketplace from American Public Media, and they recently reported on cash stuffing. The article talked about a YouTube channel called LilyBudgets, which has had over a million views.
Like most people, Lily’s paycheck is direct deposited. She goes to the bank and draws most of it out in cash, in the specific denominations she needs for each bill. The cash is then sorted into a pink envelope with dividers: housing, gas, groceries, fun. Some of the cash is returned to the bank to deposit in a Roth IRA and a savings account.
There is a risk, however. If cash is lost or stolen, there isn’t any good recourse. You’re just out the money you had set aside to pay those bills. For many, that is financially devastating. Our money is so much safer in a bank!
Lily loves handling the money, counting the bills as she pays for everything. She thinks the tangible nature of money helps her save. And multiple studies show that she is right.
The Marketplace article talked about the endowment effect. When you hold onto something, you cherish it more. You see your hard-earned money, what you labored for hours to earn, being given to someone else. You’re less likely to let it go, so you spend less.
Compare that to the alternative used by most people Lily’s age, or mine, for that matter. Tap your phone. Use a cash app. If you’re a Luddite, you might even get out a credit or debit card. Those are all payments that put a wall between us and our money, so we don’t really pay attention to how much we are spending. And when we are not paying attention, we spend more.
Who uses cash stuffing? People who have trouble managing their money. People who have racked up too much credit card debt. People who haven’t been able to successfully manage checking accounts. Even young people who like the aesthetics of cash and want to post about it.
Do they realize they are following the example of Great-Grandma? Hey, it worked for her!