{"id":29138,"date":"2023-10-24T14:24:09","date_gmt":"2023-10-24T14:24:09","guid":{"rendered":"https:\/\/isafespend.com\/news\/a-risk-of-cash-stuffing-you-may-forgo-the-easiest-money-you-are-ever-going-to-make-says-analyst\/"},"modified":"2023-10-24T14:24:12","modified_gmt":"2023-10-24T14:24:12","slug":"a-risk-of-cash-stuffing-you-may-forgo-the-easiest-money-you-are-ever-going-to-make-says-analyst","status":"publish","type":"post","link":"https:\/\/isafespend.com\/?p=29138","title":{"rendered":"A risk of ‘cash stuffing:’ You may forgo \u2018the easiest money you are ever going to make,\u2019 says analyst"},"content":{"rendered":"
<\/span><\/p>\n
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These days,\u00a0savers can get better returns on their cash\u00a0than they have in nearly two decades.<\/p>\n

After a series of\u00a0interest rate hikes\u00a0from the\u00a0Federal Reserve, top-yielding online savings account rates are now more than 5%, according to Bankrate.com.<\/p>\n

“Moving your money to a high-yield savings account is the easiest money you are ever going to make,” said Greg McBride, Bankrate.com’s chief financial analyst.<\/p>\n

More from Personal Finance:<\/strong>
The inflation breakdown for September 2023 \u2014 in one chart
Social Security cost-of-living adjustment will be 3.2% in 2024
Lawmakers take aim at credit card debt, interest rates, fees<\/p>\n

And yet, some people are forgoing competitive returns altogether in favor of keeping cash, literally, at home.<\/p>\n<\/div>\n

How cash stuffing works<\/h2>\n
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After gaining popularity on TikTok, more young adults are trying the so-called envelope method, or “cash stuffing,” to stay on budget and out of debt.<\/p>\n

The premise is simple: Spending money is divided up into envelopes representing your monthly expenses, such as groceries and gas. When the cash in one envelope is spent, you’re either done spending in that category for that month, or you need to borrow from another envelope.<\/p>\n

“There is this back-to-basics mentality,” said Ted Rossman, senior industry analyst at Bankrate.<\/p>\n

Such tools can help impose discipline, he said, which is “a reasonable way to stay on budget.”<\/p>\n

However, it’s not “the ideal scenario,” he added.<\/p>\n<\/div>\n

Some downsides of keeping cash<\/h2>\n
\n

Stashing cash not only forgoes the protections that come with consumer banking, it may also leave you vulnerable to theft.<\/p>\n

Whether you are covered in case of a burglary may depend on your home insurance policy, whereas banks are covered by the FDIC, which insures your money for up to $250,000 per depositor, per account ownership category.<\/p>\n

And then there is the additional cost that McBride flagged: a missed opportunity to earn up to 5% on your savings.<\/p>\n<\/div>\n

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“Generally, introducing the idea of budgeting is probably a positive thing but if folks are leaning on cash as opposed to taking advantage of the highest returns we’ve seen in a long time in high-yield savings accounts, then they are leaving money on the table,” said Matt Schulz, chief credit analyst at LendingTree.<\/p>\n

For example, if you have $5,000 in a high-yield savings account earning 5%, you’ll make $250 in interest in a year.<\/p>\n

“When you are living paycheck to paycheck, every little bit helps,” Schulz said.<\/p>\n

Alternatives like\u00a0Treasury bills,\u00a0certificates of deposit\u00a0or\u00a0money market accounts\u00a0have also emerged as\u00a0competitive options for cash, although this may mean tying up your savings for a few months or more.<\/p>\n<\/div>\n

Vet financial advice from social media<\/h2>\n
\n

Dvorkin recommends seeking out credible sources such as the National Foundation for Credit Counseling\u00a0or the Consumer Financial Protection Bureau.<\/p>\n

“Stay away from TikTok, stay away from Instagram,” he said.<\/p>\n

Subscribe to CNBC on YouTube.<\/strong><\/em><\/p>\n<\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

These days,\u00a0savers can get better returns on their cash\u00a0than they have in nearly two decades. 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