A survey by The Motley Fool Ascent from July 2023 found that the typical American has $1,200 in their savings account. While having any money saved is a good thing, there's no denying that it can be hard, especially when there are so many other financial obligations to consider. If you haven't heard of it, the 100 Envelope Savings Challenge is one way to slip into the habit of saving one dollar at a time.
Introduced to the challenge
We all have that one person in our lives, the one who approaches personal finances like a surgeon preparing for an intricate operation. For me, it's my niece. I'm pretty sure she began worrying about retirement when she was in middle school, which may be a bit much. However, that focus on finances has also made her hyper aware of how she handles money.
A few months ago, she mentioned that she and her husband are building up a fund for projects around the house, but they're trying something new. They're not depositing extra funds into a savings account. Instead, they're participating in the 100 Envelope Savings Challenge.
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They have money in their checking account to pay bills, participate in employer-sponsored retirement plans, and save regularly. However, they feel as if the money in each account is already earmarked for other purposes and won't dip into one of them to make cosmetic changes to their home.
My niece is also pretty allergic to debt, which makes me happy. However, that means she won't put a non-necessity on a credit card or take out a personal loan for something she can live without. Enter, the 100 Envelope Savings Challenge.
How it works
The 100 Envelope Savings Challenge can be adjusted to work for you. My niece purchased an inexpensive notebook designed specifically for the challenge.
The notebook has 25 plastic pages, each with four small pockets (or envelopes). Each pocket is numbered from 1 to 100. On the first day, you slide $1 in pocket No. 1. On the second day, you place $2 in pocket No. 2, and so on, until all the pockets are filled. By the time you've filled them all, you have saved a total of $5,050.
Adjusting the challenge to fit your needs
I was curious enough to buy a challenge notebook. My husband and I have a wish list of projects we want to do with our yard this spring and summer, and like my niece, I won't take money from another account. I've been adding bills for a few weeks now and have come up with a few insights:
- If you'd rather not use a notebook, you can take on the same challenge using 100 separate envelopes. I considered going that route, but realized that using the notebook would keep things tidier.
- You don't have to add money every day. I don't always have spare cash lying around, and taking money out of my checking account to feed the notebook defeats the purpose. The idea (for us) is to build up a fund without disrupting our normal monthly budget. We went out of town last weekend, and as is often the case, we returned home with a small pile of bills. I used some of those bills to fill a few empty pockets.
- My niece tells me that using the notebook challenges her to stick with a household budget. She says when she comes in under budget in a specific category (like food or a utility bill), she uses that money to fill pockets.
- It may be called the 100 Envelope Savings Challenge, but that doesn't mean you're expected to have all the pockets filled within 100 days. For some of us, it may take much longer, especially when we get past the No. 20 pocket.
- You don't have to go in order. For example, it's okay to put a $5 bill into the No. 5 pocket before ever putting a $1 bill in the No. 1 pocket. It's all about what cash you have available.
- You can set your own goal. I know that once it's filled, the notebook will hold $5,050, but I have no plans to save that much for yard projects. I would rather put the money into a high-yield savings account and earn interest. The only reason I don't feel bad about putting cash for our yard projects into plastic pockets is that it will all be spent in a matter of weeks, and wouldn't have had time to earn much interest anyway.
This challenge could be great for kids
On Monday, as I sat on the family room floor, neatly folding small bills and sliding them into pockets, I thought about how much fun my kids would have had with this when they were young. We could decide together what we should save for and keep careful track of our progress. It wouldn't teach them anything about the importance of compound interest, but it would have helped get them into the habit of tucking extra money away.
If you're looking for a way to meet a savings goal, doing it $1 at a time really can work.
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FAQs
The 100-envelope challenge is pretty straightforward: You take 100 envelopes, number each of them and then save the corresponding dollar amount in each envelope. For instance, you put $1 in “Envelope 1,” $2 in “Envelope 2,” and so on. By the end of 100 days, you'll have saved $5,050.
How does the 100 envelope saving challenge work? ›
It works like this: Gather 100 envelopes and number them from 1 to 100. Each day, fill up one envelope with the amount of cash corresponding to the number on the envelope. You can fill up the envelopes in order or pick them at random. After you've filled up all the envelopes, you'll have a total savings of $5,050.
What is the 100 envelope challenge equation? ›
The child genius had realised that if you group the numbers from 1 to 100 in pairs, the sum is equal to (1 + 100) + (2 + 99) + (3 + 98) + … In other words, 101 + 101 + 101 + … Since there are 50 pairs of numbers, the sum is 101 x 50 = 5050. The 100 envelope challenge is a way of saving £5050 in 25 weeks.
How does the saving challenge work? ›
There are no complicated rules to remember. Week 1, you save $1.00. Week 2 you save $2.00, and it continues through the year, adding one more dollar to each week's savings goal. By Week 52, you'll set aside $52.00, which will bring the year's total savings to $1,378!
What is the envelope saving method? ›
The envelope budgeting system is one option for tracking spending each month. This method requires dividing the available spending money into separate envelopes that represent your key spending categories. They can be virtual envelopes: The approach can be adapted for use with mobile budgeting apps.
How much does the 100-envelope challenge save? ›
Take stock of your savings At the end of 100 days, you'll have 100 envelopes containing $5,050. That's right—1 + 2 + 3 + 4 and every other number through 100 equals just over $5,000.
How do you save on the 100 envelopes trick? ›
The 100-envelope challenge is pretty straightforward: You take 100 envelopes, number each of them and then save the corresponding dollar amount in each envelope. For instance, you put $1 in “Envelope 1,” $2 in “Envelope 2,” and so on. By the end of 100 days, you'll have saved $5,050.
How to save $5000 in 6 months with 100 envelopes? ›
Here's what you'll need to do:
- Get 100 empty envelopes.
- Number each envelope from 1 to 100.
- Store your envelopes in a container.
- Shuffle the envelopes in random order.
- Pick an envelope at random each day.
- Insert the day's money amount in the envelope.
- Put the filled envelope aside.
- Track your savings progress.
On day one, you'll place $1 in envelope one. On day two, you'll add $2 to envelope two, and so on. Place each envelope in a safe place, and by the end of the challenge, you'll have saved $5,050. Using this method, you'll save very small amounts in the early days and larger amounts toward the end of the challenge.
How does the 52 week envelope challenge work? ›
Match each week's savings amount with the number of the week in your challenge. In other words, you'll save $1 the first week, $2 the second week, $3 the third week, and so on until you put away $52 in week 52.
Money-saving challenges are budgeting activities that encourage spenders to achieve a certain financial goal creatively. Whether saving up or changing a financial habit, money-saving challenges may help you keep track of your spending and set small achievable goals.
How much is $1 dollar a day for a year? ›
The answer to that question depends on interest rates or rates of return. With no interest involved, putting one dollar a day into a bank account (or a jar at home) will see you end up with $365 in a year. Multiply that amount by 30 years and you'll end up with $10,950.
How much is $1 a week for a year? ›
The 52-week money challenge is a savings method where you increase the amount you save by $1 every week for a year. So, you'll deposit $1 into your savings account during Week One, $2 during Week Two, and so on, until you reach Week 52 and deposit $52. Your total savings over the 52 weeks should total to $1,378.
Why is the envelope method effective? ›
The envelope system is based on the whole psychology of people spending less when using cash instead of plastic. You are far more restrained in your spending when you pull money (not plastic) out of your wallet. That's one of the biggest benefits to stuffing cash into envelopes for budgeting purposes.
How might using the envelope method benefit you? ›
The envelope system can help new budgeters and impulsive spenders. It lets you set goals and gauge how much you spend and save. Armed with a plan, you can learn how to stick to a budget and take charge of your finances.
How does the envelope method work? ›
The idea is to split up your money according to how much you want to spend in each category—and then only let yourself spend until the cash in each envelope is gone. Envelope budgeting works best for variable expenses, like groceries and dining out, which change slightly every month depending on your spending habits.
How to save $10,000 in 100 envelopes? ›
On each envelope, write the day number and the amount you need to save for that day. For instance, on the first envelope, you would write "Day 1: $1" and on the second envelope "Day 2: $2", and so on all the way to Day 100: $100. Each day, you take the envelope for that day and put the designated amount of cash inside.
How do you do the 100-envelope challenge biweekly? ›
Biweekly 100 envelope challenge
Number envelopes from $1 to $100. Randomly pick two envelopes every two weeks and save the combined amount they represent. It's unpredictable and exciting!
How to save $5000 in 12 months? ›
Ways To Save $5,000 in a Year
- “Chunk” Your Savings. The first step to saving $5,000 in a year is to break down your savings goal into manageable portions. ...
- Automate Your Savings. ...
- Save in a High-Yield Saving Account. ...
- Track Your Cash Flow. ...
- Boost Your Earnings. ...
- Declutter for Cash. ...
- Evaluate Your Subscriptions. ...
- Challenge Yourself.
