An insurer has warned people about the risks involved with a budgeting trend called 'cash stuffing' which has picked up traction on social media.

'Cash stuffing' involves dividing physical cash into envelopes that can be used for different types of spending, which could include regular bills and Christmas shopping, for example.

Admiral is reminding those considering the trend to check how much cash their insurance policy covers them for, in case the money is lost or stolen.

It said that one customer who was using the cash stuffing hack had envelopes containing £1,700 stolen.

Admiral said that, in that case, the claim was covered, and have urged others to make sure they would be in this sort of circumstance.

County Times: Cash stuffing is a budgeting trend that involves dividing cash into physical envelopesCash stuffing is a budgeting trend that involves dividing cash into physical envelopes (Image: PA)

Important to know that you're insured

Noel Summerfield, head of household insurance at Admiral said he thought the budgeting technique could be useful but warned people to be careful.

He explained: “Allocating different spending pots can be an effective way of budgeting and staying on top of spending, especially ahead of the Christmas period, which can be an expensive time.

“However, having large amounts of cash in the house has its risks. We’ve seen multiple claims where large amounts of cash kept in envelopes have been stolen during a break-in.

“Most home insurance policies should cover money in the home, up to the amount listed on your policy so it’s important to check how much cash you’re covered for, should the worst happen, and your money is lost or stolen."

Mr Summerfield added that it was important for people to know exactly what they're covered for.

He added: "If you must keep cash in the home, make sure it is stored safely in your home, not in a garage or outbuilding and check the limit you are covered for shown in your policy documents.”

As an alternative to keeping physical money in envelopes, some banks offer savings pots features in their apps, to help people budget for different types of spending.