How to Setup a Cashless Envelope System

Disclosure: Some of the links below are affiliate links. This means that, at zero cost to you, I will earn an affiliate commission if you click through the link and finalize a purchase.

I often receive comments on social media about alternatives to the cash envelope system. I have heard countless people voice their fears of having large sums of cash in their home. They are worried about theft, natural disasters (floods and fires), or having to find a place to store money in their home. They ask if there is a way to keep track of their savings and spending without using physical cash. I always answer with, ABSOLUTELY YES! Today, I am going to tell you about a method that I use for some of my savings accounts: the Cashless Envelope System Method. 

I even included some FREEBIES to help you get started with using the cashless envelope system! These include printable prop money placeholders. Enough of the chit chat, let’s get started!

To get your Free Prop Money Placeholders, click the link below to begin the download!

What is a Cashless Envelope System?

A cashless envelope system is a method used to manage your budget without the use of physical cash. It is often used when you want to keep track of how much your are saving or spending in your checking and savings accounts. A cashless envelope system is similar to the cash envelope system, due to the same tracking method being used. With both methods you track your spending, but the difference is in where you keep your money.

Cash Envelope System vs. Cashless Envelope System

For the cash envelope system you put money into an envelope each time that you get paid to cover spending until your next pay period and to save for sinking funds until the savings goal is reached. The only difference between a cash envelope system and cashless envelope system is physical money. When you use cash envelopes, the money is placed in an envelope for the budget category. The money in a cashless envelope system is placed in a checking or savings account at a financial institution. When you are ready to use the money you either use a debit card or pull out cash to pay for the budget category. 

If you are conflicted about which cash system to use it comes down to one question. Do you feel comfortable with physical cash in your home or with the cash in the bank? I use both cash system methods because there is a certain amount of cash that I am comfortable having in my home. But, for larger savings goals such as a car, down payment, vacation, Christmas, and other large savings goals, I prefer to have the money in the bank. IT’S YOUR MONEY and you get to decide which method is best for you. 

Using Prop Money in Your Cash Envelopes

If you still want to use cash envelopes, but are hesitant to use real money, then I have a solution for you. PROP MONEY PLACEHOLDERS! A lot of budgeters use prop money placeholders in their cash envelopes to represent the money that is in their bank and savings accounts. This helps you to keep track of where the money in the bank account is categorized to. It also provides you with a visual representation of the money that you have. It is a great way to stay motivated on your budgeting journey because there is something about holding the money (even if it is fake). 

There are so many types of prop money placeholders: prop money that looks like real money, prop money with quotes, people, characters, colors, and etc. If you do a quick Google search so many options will appear. I have included free printable prop money placeholders in the free resource library. Scroll down to the bottom of this post access them. 

How to Set Up a Cashless Envelope System

By now, you are probably wondering how to set up a cashless envelope system for your daily expenses and spending. Here are some easy steps to get started with a cashless envelope system:

1. Choose the Categories you want to Track – Start by deciding how many categories you want to track and what they will be. Some common categories include groceries, entertainment, and transportation.
2. Set Up Your Budget – Once you’ve decided on your categories, set a budget for each one. This will help you stay within your spending limits and create a plan for each category. 
3. Open a Bank Account for the Cashless Envelopes- Most banks offer checking or savings accounts that you can use to manage your budget. This account will allow you to transfer money from one category to another, so you can keep track of your spending. 
4. Transfer Money into your Envelopes – To start using your cashless envelope system, you must transfer money from your bank account into your cash envelope accounts. Depending on the bank you use, you can do this online, in person, or over the phone. 
5. Start Spending – Once you have money in your envelopes, you can start spending it! Make sure to keep track of all your purchases and transfer money from other envelopes if necessary. 
6. Monitor Your Progress – To stay on track with your budget, monitor your spending throughout the month. This will help you stay within your budget and adjust your spending habits for the future. 

Free Printable Prop Money Placeholders 

If you are interested in using a cashless envelope system but want to have a physical representation of money in your cash envelopes, then I have a treat for you! I created prop money placeholders that can be used in your cash envelopes! The best part is that this is a FREEBIE to you that can help you start your cashless envelope system today! 

These placeholders are available in the A6 Size and fit perfectly inside of an A6 envelope. They come in denominations of: $10, $20, $50, $100, $500, and $1,000. They are available in two different designs so mix it up by using both designs or choose one style that you like!

To get your Free printable prop money placeholders, Click the link to begin the Download:

Please feel free to check out the free budgeting resource library that has all a bunch of budgeting trackers to help you transform your finances: Free Budgeting Resource Library.

Choose the Cash System Method that Works for You

By now you know what a cashless envelope system is and how it can help you keep track of the money in your savings accounts. You know the difference between a cash envelope system and cashless envelope system. You also know how to set up a cashless envelope system and you now have access to free prop money placeholders to help you get started today. 

If you plan to use a cashless envelope system, I would love for you to leave a comment below! Let me know how you plan to track your budget below. Please share this with someone who this would help and connect with me on social media (@TheSavingButterfly)!