Tapping your card can make you lose track of spending

People may be making a return to cash.

Swiping a card at the till can be very convenient but when we’re not dealing with physical cash, it can sometimes be harder to keep track of how much we’re spending.

Cards may be the norm these days but recently it’s been suggested that some people are turning back to notes and coins to help them balance their budgets.

The Post Office handled a record £3.45 billion in cash in August, suggesting people may be increasingly turning to cash to manage their budget on a weekly or even daily basis.

One trend which has been popular on social media is “cash stuffing” – which goes back to traditional methods of using physical money to budget.

People using this method label envelopes with different spending categories such as bills, socialising, birthdays or clothes – and these can be kept separate in a folder or wallet.

If you are handling physical cash, it may make you more aware of how much you are spending, and how much you need to keep back to get you through to your next pay day.

At the end of each week or month, you’ll be able to see in each envelope exactly how much you’ve spent, which could help you with setting budgets in the future.

It could also help you if you go over-budget in an envelope meant for essentials such as fuel or food. You can dip into a non-essential category such as holidays.

However, there are potential downsides and risks to handling piles of cash too.

If the money is being kept in envelopes, it’s not earning interest as it could be if kept in a bank account, where it may have at least a chance of partly offsetting the current sky-high rate of inflation. Many providers have raised rates on savings recently.

There is also the danger of money being lost or stolen and, if you are keeping significant sums of at home, this may not necessarily be covered by your insurance, so you may need to check your individual policy.

For insurance giant Aviva, for example, the sum under standard home contents cover is £750 for cash in the home (this also includes travel tickets and gift vouchers). For cash to be covered outside the home, people would usually need a personal belongings add-on to their home insurance policy, and there may be a limit for cash outside the home.

There may be other ways you can use cash to build up savings, however. For example, there’s the penny savings challenge, where people save 1p on the first day of the month, 2p on the second day, 3p on the third day, and so on, which could be done in cash or on your banking app.

If cash isn’t for you, it could pay to make the most of savings and budgeting tools in banking apps.

You could try “round ups”, for instance, to deposit small amounts of change into your savings account each time you spend, or have several savings accounts for specific savings goals, such as holidays or clothes.

TAKE NOTE: Handling cash can make us more aware of our spending as you can see it disappear into the till.