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When you’re thinking about earning more money in the quickest way possible, you might consider targeting a certificate program. Certificate programs have a major added benefit in that once you have your credentials in hand, they can help you boost your financial situation, sometimes significantly.

Graduates of all levels can take advantage of certificate programs, whether you’re a high school graduate or whether you have completed graduate school. (You may have come across information about paying for graduate certificates in your graduate school program.)

Keep reading to learn the definition of certificate programs, whether you’re eligible for student loans with a certificate program, funding options for certificate programs, the pros and cons of taking out a student loan for certificate programs, and more.

What Are Certificate Programs?

Certificate programs can help you specialize in a specific trade or update your professional skills. These programs teach practical skills and training related to a specific career field — you don’t take general courses toward a degree.

Why might you want to tap into a certificate program? In addition to increasing your salary potential, you may want to get updated career training or learn about technological advancements or updates in your field.

Students who have a high school diploma or general educational development (GED) can use undergraduate certificate programs to go straight into the workforce with an entry-level position within a specific field.

Students who have already earned bachelor’s or graduate degrees may be interested in enrolling in certificate programs related to their field and level. Certificates could also give those who have already earned a bachelor’s degree an option to advance their career while avoiding graduate school altogether. (However, it’s important to distinguish the difference between a certification and a certificate. A certification usually means a stepping-stone credential that you must have for certain career paths. This article primarily discusses certificate programs, but some careers may require a certificate, even after getting a bachelor’s or graduate degree.)

Recommended: Is a Post-Grad Certificate Program Worth It?

Cost of Certificate Programs

The earning potential relative to the low cost of a certificate program can pay off. For example, consider that in the 2023-2024 academic year, students at private nonprofit four-year institutions paid $41,540 on average for tuition and fees.

Students can spend far less on a certificate program — around $5,000 per program (or more or less, depending on the type of program you choose to complete). The variations in cost depend on the college, program, and credit requirements. For example, an online program at a community college will most likely cost less than through an in-person state or private college certificate program.

Let’s take a look at a few types of certificate programs and potential earnings:

•   Surgical technologists: Earn a median income of $60,370 per year as of 2023 and will see 5% job growth through 2032, according to the Bureau of Labor Statistics (BLS).

•   Construction and building inspectors: Earn a median income of $67,700 per year as of 2023, according to the BLS, though it is anticipated the industry will see a 2% decline through 2032.

•   Plumbers, pipefitters, and steamfitters: Earn a median income of $61,550 per year as of 2023, according to the BLS. This job is expected to experience a 2% increase in growth through 2032.

•   Court reporters: Earn a $63,940 median income per year as of 2023, according to the BLS. The industry will see a 3% increase in job growth through 2032.

•   Sheet metal workers: Earn a $58,780 median income per year as of 2023, according to the BLS. The industry is expected to see no increase in job growth through the year 2032.

Are Certificate Programs Eligible for Student Loans?

Yes, you can get a student loan to help you pay for a qualifying certificate program. As long as you attend an eligible school, you may qualify for a federal or private student loan to pay for a certificate program.

However, certain certificate programs may not qualify for federal student aid, depending on the nature of the certificate program. For example, if you need to take a class to boost your credentials as a criminalist in the DNA section of your state’s crime lab, you may not be able to borrow student loans to cover that class. In some cases, your employer may cover the fees for your course.

We’ll dive into the exact funding options for certificate programs below.

Funding Options for Certificate Programs

Before embarking on a certificate program, you need to figure out how you’re going to pay for it. Talk to the financial aid office at the college, university, or career school you plan to attend. Options for paying for certificate programs include:

Private Student Loans

Can you get student loans for certificate programs, or more specifically, private student loans for certificate programs? Answer: Yes!

A private student loan refers to money you borrow for educational expenses and pay back over time, with interest. You can get a private student loan to cover the cost of a certificate program. Private student loans can come from a bank, credit union, or another financial institution.

Interest rates are usually slightly higher for private student loans compared to federal student loans. Federal loans also come with borrower protections and forgiveness options. In general, it’s best to exhaust your federal student loan options prior to tapping into private student loans, if you’re eligible. The amount you can borrow depends on the cost of your degree and personal financial factors like your credit score and income.

Check out the private student loan guide for more information about student loans.

Federal Grants

You may qualify for federal grants to cover the costs of a certificate program. Federal grants are typically free money, assuming you meet the obligations. 

In order to qualify for a federal grant, you must file the Free Application for Federal Student Aid (FAFSA®). The FAFSA will also verify whether your certificate program qualifies for federal student aid under the U.S. Department of Education.

You may qualify for a Pell Grant , the largest program under the Department of Education. Pell Grants are awarded to students with financial need and no prior degree. You may also be able to tap into Federal Supplemental Educational Opportunity Grants (FSEOG).

Recommended: FAFSA Grants & Other Types of Financial Aid

Federal Student Loans

Just like federal grants, you must file the FAFSA in order to qualify for federal student loans. The difference between federal grants and federal student loans is that you must repay the money you borrow for loans. You must also meet some basic eligibility criteria to qualify for federal student loans.

Undergraduate certificate students who show evidence of financial need may qualify for a Direct Subsidized Loan. Undergraduate, graduate, and professional students can qualify for a Direct Unsubsidized Loan, but eligibility is non-need-based. It’s important to discuss both of these options as well as Direct PLUS Loans for graduate or professional students with financial aid offices to determine whether you can get any one of these loans to cover the costs of your certificate program.

You must go through entrance counseling to make sure you understand your loan repayment obligations to get a federal graduate student loan or undergraduate loan, as well as sign a Master Promissory Note. The Master Promissory Note states that you agree to the terms of the loan.

Recommended: Types of Federal Student Loans

Personal Loans

It may also be possible to borrow money from a bank, credit union, or online lender in the form of a personal loan. You’ll pay back a personal loan in fixed monthly payments or installments, usually over the course of two to seven years.

Just like a student loan, a personal loan is an unsecured debt. This means that it isn’t backed by collateral. If you stop making payments, none of your assets will be seized by the lender.

Interest rates may be higher for personal loans compared to private student loans and federal student loans, however. Do your homework before selecting one option over the other.

Employer Funds

If you’re currently employed and a certification relates to your current job description, your employer may pay for a portion or all of the cost of your certificate program. Companies like Starbucks, Google, and Target all have tuition assistance programs. Many companies will offer tuition assistance for college courses and some may even cover professional certifications.

Explore your options with your human resources office or ask your supervisor for more information.

Recommended: How to Pay for a Grad Certificate Program

Pros and Cons of Taking Out Loans for Certificate Programs

What are the pros and cons of taking out loans for certificate programs? Let’s walk through a few.

Pros of Taking Out Loans for Certificate Programs

•   Offers career change opportunities: You may want to branch out or change your career completely, and getting a loan for a certificate program may allow you to do so.

•   Costs less than a traditional degree: A certification usually costs less than pursuing a four-year or even a two-year degree. You may quickly pay off a loan, particularly because it may take you only a few months to attain a certificate.

Cons of Taking Out Loans for Certificate Programs

•   You owe money with interest: The obvious downside to taking out a loan is that you’ll owe money at the end of your program — with interest. Because a certificate program can generally be completed in a relatively short time frame, though, you may be able to repay your loan (and minimize the interest rate impact) in a short period of time.

•   Choosing the right option can be complicated: You may feel as if you’re in a maze with so many different options at your disposal. It’s a good idea to reach out to a financial aid professional at the school you’ve chosen to go over all your financing options. They can also guide you through the scholarships and grant opportunities that you can obtain.

Explore Private Student Loans With SoFi

It’s almost impossible to ignore the allure of a quick certification that can result in a lifetime of job satisfaction. Options for paying for certification include cash savings, grants, scholarships, federal student loans, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

Can federal student loans be used for certificate programs?

Yes, in certain cases, you can get federal student loans to cover the cost of certificate programs. However, your school and program must qualify under the Department of Education rules. Talk to the financial aid office at your college or career center for more information about your eligibility for federal student loans.

Can grants and scholarships be used for certificate programs?

Yes, you can obtain grants and scholarships to cover the cost of certificate programs. Talk to the financial aid office at your college or career center for more information. Your school may offer specific scholarships, but don’t forget to check into professional organizations or local chapters for the certificate program of which you plan to enroll.

Do some companies pay for employee certifications?

Yes, many employers pay for employee certifications to help boost employee retention and put employees at the top of their field. These may differ from certificate programs, however, so make sure you understand how your career-based certification may differ from a certificate. Ask your human resources office for information about continuing education or certification training.

Photo credit: iStock/PeopleImages

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Personal loans are a type of lending instrument offered through banks, credit unions, and online lenders. They’re paid back, with interest, in installments, and there are few limitations to how the loan funds can be used. They’re also typically unsecured, meaning you don’t have to put up any property as collateral for the loan.

A personal loan is an important financial tool if you can find one from a reputable lender at a reasonable interest rate, and you can commit to making loan payments on time. However, if you only qualify for a loan with a high-interest rate or you feel you may have trouble paying it back, you may want to think twice before applying.

Are Personal Loans Bad?

Not necessarily. There are both advantages and disadvantages to personal loans. Here’s a look at some of the benefits of taking out a personal loan:

•   Personal loans generally offer a wide range of borrowing limits, typically between $1,000 and $100,000.

•   There is flexibility in how the funds can be spent, unlike a mortgage, which you must use to buy a house, or an auto loan, which must be used to purchase a car.

•   Proceeds of personal loans can be used for a variety of purposes, from paying down credit card debt to making home improvements and more.

•   Unsecured personal loans are offered by many lenders. There is no need to put any of your assets up as collateral for the loan, nor do you risk losing them should you default.

It’s important to weigh these benefits against potential disadvantages, and determine if it’s bad to get a personal loan for your financial needs. Here’s a look at some of the downsides of taking out a personal loan.

•   Personal loans may not offer the lowest possible borrowing option. For example, you might be able to get a better rate on a home equity loan or a home equity line of credit (HELOC) if you have enough equity in your home. That said, both of those lending instruments use your house as collateral, so if you default, you could risk losing your home.

•   Personal loans sometimes have fees or penalties that can increase the cost of borrowing. For example, origination fees on personal loans tend to be between 1% and 5%. Some lenders may charge prepayment penalties to ensure they don’t lose future interest payments if you pay off your loan early.

•   When you take out a personal loan, you’re increasing your overall debt. If you have other debts, comfortably affording all your monthly payments can become a challenge. And missing payments or making late payments can have a negative impact on your credit score.

Recommended: What Is Considered a Bad Credit Score?

Pros and Cons of Personal Loans

Here’s a look at the pros and cons of personal loans at a glance:

When Can It Be a Good Idea to Get a Personal Loan?

So when is a personal loan a good idea?

Debt Consolidation

One reason to take out a personal loan is as a credit debt consolidation loan to pay down high interest credit card debt. The average credit card interest rate as of August 2024 is 27.62%. The current average personal loan interest rate, on the other hand, is 12.38% (if you have excellent credit you may pay less; if you have poor credit, you could pay more).

Consolidating high interest credit card debt with a lower-interest-rate personal loan may make your monthly payments more manageable and potentially save you money in interest payments over the life of the loan.

If you use a personal loan to pay down credit card debt, it’s a good idea not to use those credit cards to incur even more debt.

Home Improvement

Using a personal loan to make improvements to your home may also be beneficial as home improvements can increase the value of your home, possibly offsetting the cost of borrowing.

When Can It Be a Bad Idea to Get a Personal Loan?

There are a number of cases when you may wonder if getting a loan is bad. Here’s a look at some situations when getting a personal loan may not be a good idea.

No Credit Check Loans

Most loans — including most personal loans — require a credit check. This helps your lender understand your creditworthiness, or how likely you are to repay your debts. Generally speaking, the healthier your credit, the more favorable your loan interest rates and terms. Those with poor or limited credit may find it difficult to qualify for a loan.

No credit check personal loans, on the other hand, look at your bank account balance or require you to pledge some asset as collateral to secure the loan.

The problem is that these loans also tend to be extremely expensive — interest rates can well exceed 100%, which is considered to be predatory. There’s a pretty good chance that borrowers who rely on no credit check loans won’t be able to pay their bills on time, which could trap them in a cycle of debt.

Recommended: How To Avoid Falling Victim To Predatory Loans

Cheaper Alternatives May Be Available

Before taking out a personal loan, consider whether there are cheaper alternatives. We’ve already mentioned home equity loans and HELOCs. You might also consider a no-interest credit card, which charges 0% interest for an introductory period typically lasting between 12 and 20 months. If you can pay off your debt in this time period, this may be a good option. But whatever balance you don’t pay off in time may revert to the card’s regular rate, which is likely high.

You Are Not Good at Managing Debt

If you’re not good at managing debt, think twice before taking on more. And if you use your personal loan to consolidate credit card debt, you’ll want to be careful about racking up new credit card bills.

Discretionary Spending

Borrowing money for discretionary spending, such as vacations or an engagement ring generally isn’t a good idea. While these things are nice, they are not necessarily worth jeopardizing your financial wellbeing. Instead of borrowing to pay for big-ticket items like these, you may be better off saving for them in advance as a part of your regular budget.

Borrowing Money for Investments

It’s generally not a good idea to borrow money to make investments. By nature, investments are risky, and you are not guaranteed a return. Should the investment lose money instead of gain, you’ll be responsible for paying off your debt regardless of the investment loss.

The Takeaway

So are personal loans bad? The answer depends on how you plan to use the loan. Personal loans can be useful tools for purposes like consolidating credit card debt, making home improvements, and more.

Any time you’re considering a loan, it’s important to understand if it will meet your needs, what it will cost you, and whether there are any better alternatives out there.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

Photo credit: iStock/Morsa Images

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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You might be wondering how easy it is to get approved for a $5,000 personal loan. In most cases, the process is straightforward and no collateral is required — though you might pay more in interest if your credit is poor. Overall, a $5,000 personal loan is a good way to access cash for unexpected bills and necessary expenses.

Learn more about the typical terms and requirements for a $5,000 personal loan.

Pros of a $5,000 Personal Loan

A personal loan is money that you borrow from a bank, credit union, or online lender that you pay back in regular installments with interest, usually over about two to seven years. Personal loans have several advantages over high-interest credit cards, making them a good option for a variety of borrowers.

Popular uses for personal loans include consolidating debt, covering medical bills, and home repairs or renovations. Here’s a look at some of the pros of taking out a $5,000 personal loan.

Flexible Terms

With $5,000 personal loans, you can often choose the repayment terms to fit your budget. For example, you may be able to opt for a longer repayment term with a higher interest rate but a lower monthly payment, or you might be able to choose a shorter repayment term with a lower interest rate and a higher monthly payment.

No Collateral

Most personal loans are unsecured, meaning you aren’t required to provide collateral to be approved. That said, using collateral on a personal loan can increase your approval odds, especially if your credit is poor. Doing so could result in a larger loan amount, lower interest rate, and better terms.

Fixed Payments

The interest rate on a $5,000 personal loan is usually fixed, meaning your payments will stay the same for the life of the loan. Fixed payments are typically easier to budget for.

Cons of a $5,000 Personal Loan

Small personal loans of $5,000 or so also have disadvantages that should be considered before you apply.

Debt

You’ll be going into debt when you take out a $5,000 loan, which is the biggest downside. If you struggle to repay the loan, you can end up in a worse financial position than before you took it on.

Origination Fees

Personal loans can have many fees, including origination fees. This fee is separate from the interest the loan charges and has no direct benefit to you as the borrower.

Some origination fees can be high, up to 15% of the loan principal. Even just a 5% fee on a $5,000 loan is $250 — just to receive the money. Fortunately, there are ways to avoid loan origination fees.

Interest Rates

While personal loan interest rates are usually lower than credit cards’, they can cost you hundreds (or even thousands) over the life of the loan.

Requirements for a $5,000 Personal Loan

Requirements for a $5,000 loan vary by lender. But in general, you should have at least Fair credit, which is a score of 580 or above. Lenders may also look at other factors, such as your income and your debt-to-income ratio (DTI), during the application process.

Recommended: The Credit Score Required To Get a Personal Loan

$5,000 Personal Loan Terms

Repayment terms for a $5,000 personal loan are usually in the range of two to seven years. The length of the repayment term will play a role in determining the monthly payment amount and the interest rate.

Your credit score will also affect the interest rate. For example, the average interest rate for personal loans is 10.73%-12.50% for those with Very Good or Excellent credit. However, if you have Fair credit, the average jumps to 117.80%-19.90%.

Payment on a $5,000 Personal Loan

The payment on a $5,000 personal loan depends on the interest rate and the loan term. For example, a two-year $5,000 personal loan with a 7.80% interest rate results in your paying $226 per month. This means you’ll pay $416.34 in total interest over the life of the loan. 

If, on the other hand, you take out a three-year $5,000 loan at an interest rate of 15%, you’ll pay $173 per month. In this case, you’ll pay a total of $1,239.76 in interest over the life of the loan.

Recommended: Personal Loan vs Credit Card 

The Takeaway

Many lenders offer $5,000 personal loans with competitive interest rates and flexible terms. However, you are still charged interest and often additional fees, so you’ll want to shop around for the best deal you qualify for.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQ

What credit score do I need for a $5,000 personal loan?

In most cases, the credit score needed for a personal loan is at least 580, considered a Fair credit score. If your score is lower than that, your borrowing opportunities will be limited. Lenders may also look at other factors, such as your income and your debt-to-income ratio (DTI), during the application process.

How much is the monthly payment for a $5,000 personal loan?

The amount you will pay per month on a $5,000 personal loan will depend on the loan’s interest rate and term (length of the loan). As an example, the monthly payment on a $5,000 personal loan with a 13% interest rate and a three-year term will be $168.

How can you get a $5,000 personal loan?

Getting a personal loan generally involves checking your credit, comparing lenders (including banks, credit unions, and online lenders), getting prequalified, and then submitting your application. 

Photo credit: iStock/SDI Productions

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Cash stuffing, also referred to as money stuffing, is a viral budgeting method that involves using cash to pay for things like gas, groceries, and other discretionary purchases. Popularized on TikTok, cash stuffing has become a hot money hack for curbing impulsive spending.

While it might look brand-new, money stuffing is an updated take on the cash envelope budgeting method. With the cash envelope method, you’re simply adding cash to different envelopes that represent individual budget categories.

Does cash stuffing keep you from overspending? And how do you get started? Here’s a closer look at how this budgeting trend works.

What Is Cash Stuffing?

Cash stuffing is a budgeting method that requires you to use cash for discretionary spending instead of a debit or credit card. You add cash to individual envelopes labeled with different categories and then use those funds to make purchases. Once the envelope is empty, you can’t spend any more money in that category until your new budget period (say, the next month or next pay period) begins.

The idea behind cash stuffing is to keep spending in check. It plays into the psychology of money, which suggests that spending cash is more painful mentally and emotionally. Also, using cash may make you more mindful about your spending. Perhaps, when you think about pulling out a 10-dollar bill to buy a bubble tea, you’ll decide it’s not really worth the expense (or at least not today).

Cash stuffing can be a way to help you spend less. It may be easy to swipe your debit or credit card without thinking about the dollar amount. That’s harder to do when you’re having to count out cash pulled from your wallet or bank account each time you want to spend.

How Does Cash Stuffing Work?

Cash stuffing is a revamped version of the cash envelope method. In terms of the actual process, it works like this:

•   First, you decide which budget categories you want to assign to your envelopes. For instance, you might include entertainment, coffee, and massages. (You can also use folders or pouches in a budget binder; whatever works for you is a good choice.)

•   Next, figure out how much cash should be added to each envelope for the budgeting period.

•   At the beginning of the budgeting period, you “stuff” each of your envelopes with the allotted amount of cash.

•   Throughout the budgeting period, you spend down the cash in each envelope.

When you reach the end of the budgeting period, you start the process all over again. If you have cash left over from the previous period, you can roll it over or apply it to another financial goal, like building your emergency fund. That’s a plus if you struggle with finding motivation to save money.

Meanwhile, you’d still use your debit cards, credit card, or bank account to pay expenses not assigned to your cash envelopes. For example, you might set up an automatic payment from checking to cover your student loan payment and pay your electric bill online using your debit card.

Examples of Cash Stuffing

Cash stuffing is ideal for budgeting categories that are not fixed and may fluctuate from month to month. Some of the categories you might assign to your cash stuffing envelopes include the purely discretionary as well as those that combine needs and wants:

•   Gas

•   Groceries

•   Clothing

•   Personal care

•   Entertainment

•   Dining out

•   Hobbies and recreation

•   Extracurriculars, if you have kids

•   Pet care

•   Travel

•   Gifts

•   “Fun” money

You could also include a miscellaneous envelope to cover any expenses that don’t fit into another budget category.

Why Did Cash Stuffing Get So Popular?

Cash stuffing breathed new life into the cash envelope budgeting method largely thanks to social media. On TikTok, #cashstuffing and its related hashtags currently have about 3 billion views. There are countless clips of users, which largely include members of Gen Z, stuffing their monthly cash envelopes.

Part of the appeal of cash stuffing lies in its simplicity. Once you figure out your budgeting categories and envelopes for the month, all you have to do is repeat the process.

Cash stuffing can work with lots of different budget systems, including:

•   The 50/30/20 budget rule

•   Zero-based budgeting

•   Pay yourself first budgeting

It can also be an easy way to save money if you’re disciplined about keeping track of your cash envelopes and curtailing unnecessary spending. Cash stuffing requires you to be intentional with where and how you spend, so you don’t run out of cash midway through the month.

People who struggle with using credit cards responsibly can reduce their odds of racking up high-interest debt, since they’re using cash to pay in place of plastic. Cash stuffing puts you in control of where your money goes, instead of leaving you to wonder at the end of the month where it all went.

Pros of Cash Stuffing

Cash stuffing has some advantages, especially for people who are navigating budgeting for beginners. You don’t have to be a member of Gen Z to appreciate its usefulness either.

Here are some of the main upsides of cash stuffing.

•   It’s simple. Cash stuffing is an uncomplicated way to budget for discretionary expenses. All you need to get started is a stack of envelopes and some cash.

•   Encourages saving. Stuffing cash envelopes can promote a savings habit if you’re challenging yourself to spend less than what you’ve allocated to individual budget categories. The money you don’t spend can be put into a savings account, perhaps one earmarked for your emergency fund.

•   Track spending. As you spend down the cash in your envelopes, you can easily see at a glance how much cash you have left. You can write down each expense as you go to get an idea of where you tend to spend the most.

•   Avoid debt. Minimizing your dependence on debt is key to creating a financial plan that works. The cash stuffing system can help you break away from credit cards if you’re reliant on them and help you learn to live within your means.

Cons of Cash Stuffing

Is cash stuffing right for everyone? Not necessarily, as there are some drawbacks to keep in mind.

•   It’s time-consuming. Once you get your cash stuffing system in place, you can set it and forget it. But there is some upfront planning that’s required to get your system started, and you have to revisit it each month to restuff your envelopes.

•   You could still overspend. There’s no rule that says you can’t dip into one cash envelope to cover expenses for another envelope. That could make it all too easy to blow your budget.

•   Less protection. Losing a credit card or debit card is a pain, but there are built-in protections if someone uses your card to make unauthorized transactions. Cash, on the other hand, offers no such benefit. If you lose it or it’s stolen, it might be gone for good.

•   Missed opportunities for growth. Saving money is a good thing, and the cash stuffing method could help you do that. But you could be missing out on earning a great interest rate if you’re keeping all of your money in cash, versus depositing some of it into a high-yield savings account.

Tips on Getting Started With Cash Stuffing

If you’re ready to give cash stuffing a try, getting started isn’t that difficult. Here are a few tips for making the most of the cash stuffing budgeting method.

•   Review your budget, and break down all of your individual spending categories.

•   Decide which of those budget categories you want to use cash to pay for each month, noting which expenses you’ll pay for using your debit or credit card.

•   Calculate how much cash you should assign to each category, based on how much you’ve spent on average in the previous three to six months.

•   Choose the cash stuffing system that works best for you (i.e., cash envelopes, a budget binder, folders, etc.).

•   Decide which day of the month you’ll stuff your envelopes, based on when you get paid.

It’s also a good idea to give yourself a cash cushion when setting up a cash stuffing system. Depending on how regular your paychecks are, it may take a pay cycle or two to get used to stuffing envelopes. Keeping a few hundred dollars extra in checking that you don’t touch can help you cover any gaps in your budget until you’ve found your cash stuffing groove.

Alternatives to Cash Stuffing

Cash stuffing is one way to track and manage spending each month. If you’d rather not carry around cash, you could still apply the same basic premise in a different way.

Here are some alternatives to cash stuffing.

•   Use gift cards or prepaid debit cards. Instead of putting cash into separate envelopes, you could purchase gift cards for a set amount each month. For example, you might buy a gift card for $500 to your favorite grocery store in order to make a month’s worth of weekly food runs. That can keep you from overspending, without having to carry cash.

•   Try a budgeting app. Budgeting apps sync with your bank account and credit card accounts to track your spending. They also allow you to divide up expenses into individual budget categories each month. You could set your categories then assign each one a dollar amount, but instead of using cash, you’d use your debit card to pay for those expenses instead. (Your bank’s app may offer tools to help with this.)

•   Open a dedicated account. If you’d like to use a debit card to cover discretionary expenses, you might open a separate checking account just for that purpose. You could link it to the account where you deposit your paychecks, and then transfer over a set amount of money each payday. One thing to keep in mind, however, is that overspending could put you at risk of overdraft fees.

The Takeaway

Cash stuffing is one way to tackle the task of budgeting and to get in the habit of tracking spending regularly. It involves designating your discretionary spending categories, allocating your budget for those expenses, and then using cash (and only cash) to pay for those purchases. This can help you avoid overspending and high-interest credit card debt.

Having the right checking and savings account can help you manage your budget better, too.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Is cash stuffing better than debit cards?

Cash stuffing can be better than using debit cards in the sense that it forces you to keep track of what you spend. Using cash to pay requires you to be intentional or mindful with your money since you don’t have an unlimited amount of money to work with.

Is cash stuffing better than credit cards?

Cash stuffing can be preferable to credit cards if you’re worried about accumulating high-interest debt. When you pay with a credit card, you’re using the credit card company’s money, which has to be repaid later with interest. When you pay with cash, you’re not creating debt or incurring interest charges.

Is cash stuffing a fad or a long-term strategy?

Cash stuffing has become a viral trend, but the idea behind it is a tried and true budgeting method. It’s possible to use cash stuffing or cash envelope budgeting for the long-term to manage your money and keep tabs on what you’re spending each month.

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SoFi members with direct deposit activity can earn 4.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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