Insurers warn many contents policies cover only a limited amount of cash. Photo: 123rf.com
"Cash stuffing" is the latest budgeting trend to sweep TikTok, but it comes with a warning from insurers.
The trend - also known as the cash envelope system - is pitched as an easy way to keep track of spending without the use of complicated spreadsheets.
It involves withdrawing cash from a bank account and dividing it into envelopes for categories including groceries, bills, an emergency fund and gifting.
In theory, this should restrict spending to the cash in each envelope.
But insurers warn many contents policies cover only a limited amount of cash, and consumers could be left seriously out of pocket if their money goes missing.
AA Insurance head of home claims, Tom Bartlett, said its contents policy covered accidental loss or theft of cash up to $500, subject to limits, terms and conditions.
"We encourage customers to take reasonable care to keep their belongings safe, including keeping larger sums of money in banks and other financial institutions, rather than hidden around the home."
At Tower, contents policies covered some cash, with limits for loss of "money, gold or silver bars or ingots and precious stones" ranging from $250 to $1000.
Tower chief claims officer Steve Wilson said when cash was stolen, it was usually part of a wider home or vehicle break-in.
To keep cash safe at home, he recommended keeping purses and wallets out of sight.
"Don't leave them anywhere that's easy to spot from a window or easily accessible. If you have cash at home and want to manage your savings, talk to your bank about what your options are," he said.
Insurers overseas have reported a spike in cash theft claims over the last year.
In the UK, Admiral insurance said claims had risen by 77 percent, with the average cash theft claim amount being £333 (NZ$690), according to The Guardian.
One customer who had been using cash stuffing to manage their money made a claim that included two stolen envelopes containing £1700.
* This story originally appeared on Stuff.