Maybe you are looking for the motivation to save money. Or, maybe you find saving money just too boring. Well, let me introduce you to the social media game called the $5 Challenge.
What is the $5 Challenge? The basic idea of the $5 Challenge is that you save every $5 bill you get in change from a purchase this whole year. Put it somewhere secret (and safe!) and resist the urge to touch it, look at it, or count it. At the end of your challenge, you could have extra money for Christmas shopping, a vacation trip, or another specific purchase!
I know, this method of saving extra cash by hoarding five-dollar bills sounds a little gimmicky. The truth is, if it gets you to save your money, then it can be a good thing.
However, while this 52-week challenge can be a great way to save money painlessly – as a debt coach, I am not sure that I would encourage my clients to use such challenges as a savings strategy. There are just too many questions bouncing around in my head.
- Are you really carrying so much money (in physical cash) that you might get a $5 bill back in change frequently?
- What if a cashier gives you all $1 dollar bills? Do you save 5 of them?
- What if you only use debit/credit cards?
- Does this mean I have enough in savings that I can use this as fun money?
If you do carry a lot of cash and pay for day to day items mostly in cash (and have enough money in savings), then I think this could be a fun way to save money with little extra work. But if you are really looking for a way to scrape some money together for savings out of a tight budget, you need more than this.
Don’t get me wrong, you could end up with a lot of money doing this. Or, you could end up with ab-so-lute-ly nothing.
If you truly want to build your savings, you need a plan. Not a gimmick, not a challenge, not a bet, not a bunch of false hope.
Read about what you can do with leftover 529 college savings money.
What Is The $5 Jar Challenge?
If you just read my answer to the $5 challenge, this is very similar. The difference is that you cannot just stash that $5 bill anywhere.
You are way ahead of me on this one aren’t you? Well yep, you are right. It is the $5 challenge, only you put the money in – wait for it – a jar! It is sort of the adult version of using piggy banks.
Okay, so I’ll admit that a savings account is barely better than getting nothing in terms of the average return of interest on your money, but a jar pays exactly nothing in interest.
So now I have to wonder if the challenge really expects you to save so little that it is not worth going to the bank to deposit?
Emptying spare money into a container, such as a jar or piggy bank, really is easier and quicker than going to the bank.
Unfortunately, it is easier and quicker to withdraw it from that container too. If saving is an issue, then making the money inconvenient to get to by putting it into a bank account is a more effective way to hang onto it.
How Do You Do The 5 Dollar Savings Challenge?
I see you are still reading, so you must really want to give this a try. Okay, let’s see what we can do here to make it a little more interesting!
If you follow the basic premise of the challenge, then starting right now, you’ll do this whenever you buy anything cash. When the cashier hands you back a $5 bill as change for a purchase, you will have to commit to saving it.
This also means that if you get 2 $5 bills instead of a single $10 bill, they get saved. After all, the financial challenge is supposed to be all $5 bills and you were just handed 2 of them.
To make it more convenient to save, I will even let you put your $5 bill in a jar, coffee can, envelope, or anywhere else you can think of (download my free, printable $5 Challenge Tracker to help you keep track of your stash).
If you save just $5 once a week, you’ll have a nice little nest egg of $260.00 at the end of the challenge.
Now, let’s think of some different ways to save even more money…
How about – if you get any amount of money back that adds up to $5, it gets saved. That means if you get a smaller denomination of money – say 5-$1 bills – you save them. If you get 20 quarters, you save them.
What if you prefer using a credit/debit card?
Well, I don’t want you to feel left out, so try this simple way to build up your challenge stash: every time you use your card, think about the cash you would have paid with and consider if you would have gotten any $5 bills back. If so, save the amount you’d have gotten in physical change.
So – let’s say you bought something at the grocery store on your credit card. Your total purchase is $12.78 and you would have paid with a $20 bill if you had been using actual cash. In this case, you would drop the $5 from your “change” into your jar or coffee can.
By doing this on a regular basis, at the end of the year, you should have accumulated a nice chunk of change.
How Can I Save 5 A Week?
Let’s say that, instead of the $5 challenge, you want to try just saving $5 a week first because saving money is tough. Fair enough, this might actually be easier to accomplish than the $5 challenge.
Here are some ideas:
- When using cash, all change $5 and under that gets returned to you from a purchase gets saved.
- When using plastic, always round up and put the extra in savings. Some cards will actually do this for you.
- For every purchase, whether by cash or card, add $1 to the final amount and put that into savings.
- At the beginning of each week, simply make weekly deposits of $5 into your savings.
- Clip coupons and put the savings toward the $5.
- Stop yourself from making a purchase, and put the money you would have spent into your savings.
- Use an app to find cheaper gas.
- Better yet, try carpooling.
A little bit here and there adds up over an entire year! For instance, years ago, when I was barely making ends meet (and cash was king instead of plastic), I dropped my change into an empty Kool-Aid jar every night.
By the new year, I had saved over $300, without much thought or taking much time to do it. And, really, the best ways to increase your spending habits are the ones that are pretty effortless.
How Much Is $5 A Week For A Year?
Drum roll please… If you save just a straight $5 a week for a year, you end up with $260. Okay, this is not enough for the weekend in Las Vegas or trip to Hawaii that you’ve been dreaming off, but this could make a nice dent in your holiday spending.
I know, I said at the beginning that the $5 Challenge was gimmicky. But I also said that if it got you to save, it could be a good thing. And, this might be $260 you wouldn’t have had otherwise.
Now, if you think you can squeeze out saving $5 twice a week, that would be an easy way to end up with $520 in your 52nd week.
I would like to make a couple of suggestions here, though.
First, regardless of the method you use to save, have financial goals and a purpose for your personal 52-week money challenge. For example, save $500 (goal) for birthday presents or an emergency fund (purpose).
My next suggestion is to figure out what will ensure that you save. If you feel that a sense of discipline or responsibility will help you save, find a way to use that. If you really need to make saving money fun, then find a way to make it a game (like the $5 Challenge) or find another way that lets you enjoy saving money.
Finally, if you really do want to save but find it difficult, find an accountability partner. This can be a spouse, friend, or an actual coach, like My Online Debt Coach.
Wrapping It Up
The $5 Challenge makes it easy to save money for an emergency fund, college savings, fun expenses like a vacation, or for retirement or for whatever you choose. Going through the Challenge can get you in the habit of saving money, so you can eventually build an emergency fund and get out of debt.
If you need help getting out from under your debt, My Online Debt Coach is a judgement free place to start your journey. We would love to provide you with the tools and knowledge to live a happier life.