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What is a money saving challenge?
A money saving challenge is a way you can challenge yourself to save more and spend less. There are lots of different challenges out there and some are certainly better than others. Many help you develop a short term savings boost and others aim to increase your long term savings rate.
It goes without saying that saving money is incredibly important for the following reasons:
- No one can predict the future
- You don’t want to work forever
- Emergencies happen
- To help you make important purchases
- To reduce financial stress
By no means should any of these money saving challenges replace your current money saving habits, but they can be a fun and productive way to kick things up a notch.
Why start a money saving challenge?
Personal finance is all about developing good habits. But even with the best habits in place, saving money can seem a little lackluster. Participating in a money saving challenge can channel the competitive spirit in us all, helping to reinvigorate our desire to build a wealthy life.
The 6 best money saving challenges
We’ve combed through some of the most popular savings challenges and selected the 6 best. None of these include digging through your couch, shaking out your winter coat pockets, or picking up pennies…not that those are terrible ideas, but they aren’t likely to make much of an impact on your savings. So without further ado, here are the 6 money saving challenges to try in 2021.
1. 52 week money savings challenge
The 52 week money savings challenge puts you on a year-long schedule which gradually increases the amount you save each week. Just like compounding interest, the effect is small in the beginning but begins to really snowball towards the end of the year. In the first week of the year, you save only $1. The second week, you save $2….all the way until the last week of the year in which you save $52. At the end of the year, you’ll have saved $1378. Check out the snowball effect below:
2. No eating out for a month challenge
The average American household spent over $3,400 eating out in 2018. That averages out to over $283 a month spent at restaurants. It may not be the easiest challenge on the list, but it’s a simple one and it will save you a significant amount of money in just a month. You can also ramp up this challenge by permanently deciding to eat out only once per month and save even more while becoming quite the amateur chef.
3. Spare change challenge
While you can choose to take this challenge literally by tucking away your spare change in a piggy bank, there are now much better options out there. By using an investment app like Acorns, you can automatically round up all of your purchases to the next dollar and have that ‘spare change’ invested. So every time you spend money, you’re also saving some. By signing up you’ll even get $10 added to your account once you make your first investment.
4. No spend challenge
This money saving challenge takes a lot of willpower and is not for the faint of heart. Of course, you’ll still need to spend some money. Don’t neglect paying your rent/mortgage, utilities, groceries, and other essentials. However, this challenge requires you to give up all non-essential spending for a given period of time. Think of essential as anything that you need to keep yourself alive, healthy, and legally compliant. Anything else is likely non-essential.
Most people choose to start with a week or even a month, but the world is your oyster…maybe start with a week and see how you feel. The biggest disclaimer with this challenge is that it won’t work if you simply put off spending extra money on something until the challenge is over. Or, if you spend more money than you usually would after finishing the challenge – that won’t work either.
Deferring extra spending is not the same as going without. For example, if you typically grab a coffee at your local cafe you would have to give that up. But, when the next month rolls around, you shouldn’t start treating yourself to a coffee and pastry because you ‘earned’ it from being so good last month. That defeats the point.
5. Cut out your vices challenge
This challenge is a twofer because in most cases our vices are not only bad for our wallet but also bad for our health. Whatever your vice may be – drinking, smoking, sugary treats, gambling, too many Target runs, etc. – give it up for a month. While it won’t be easy, it will give you the opportunity to quit a less than healthy habit and increase your savings.
6. 1% challenge
The 1% challenge requires that you increase your monthly retirement contribution by 1%. If you have a 401k through your employer, it’s a simple change to make with your HR department. With your 401k contributions being made as payroll deductions, you’ll be saving extra money even while it’s out of sight and out of mind. If you manage your own retirement account (IRA), you’ll need to factor that into your deposit schedule.
To take this challenge to the next level, bump up your contribution by another 1% halfway through the year. Financial experts advise saving at least 15% of your pretax income towards retirement each year. While 1% may not seem like very much, it can make a big difference over the long run as you aim to increase your retirement savings.
How to keep yourself accountable
These money saving challenges are just that, challenges. And they only work if you stick with them. To keep yourself accountable:
Make your goals visible
Put a sign up on your fridge, a sticky note on your desk or a reminder in your phone, whatever it takes to help you keep up the motivation.
Tell your friends and family what you’re up to
Especially if you’re on the no spend or no eating out challenge, don’t make them worry that all of a sudden you don’t like going to dinner with them anymore.
Ask someone you trust to be your accountability partner
Whoever it is, make sure they aren’t afraid to call you out when you mess up.
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