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
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.
How do you use the 100 envelope savings challenge? ›
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 money saving challenge work? ›
The 52-week money challenge involves saving an increasing amount of money each week for one year. The challenge can be adjusted to fit personal financial circ*mstances and goals. Opening a high-yield savings account and utilizing automated savings features can help make the challenge more manageable and successful.
What is the envelope saving method? ›
The concept is simple: Take a few envelopes, write a specific expense category on each one — like groceries, rent or student loans — and then put the money you plan to spend on those things into the envelopes. Traditionally, people have used the envelope system on a monthly basis, using actual cash and envelopes.
How much money would you have if you did the 1 100 envelope challenge? ›
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 can I save $5000 in 6 months with 100 envelopes? ›
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.
Is the 100-envelope challenge worth it? ›
The benefit of the 100 Envelopes Challenge is that it starts small and encourages constant, conscious saving that builds quickly. But the trend—and the internet's obsession with buying “aesthetic” envelopes for it—may not be the most effective way to put away money, according to financial experts.
How do you do the money savings trick with envelopes? ›
Each day, for 100 days, you draw an envelope from the box and place the amount of money that's written on it inside the envelope. Then, you continue the process until each one is filled up. At the end of the 100 days, if you stay consistent, you can save $5,050.
How to save $10,000 in 100 days? ›
The idea behind this challenge is to divide your savings goal into 100 parts and save a set amount each day for 100 days. To get started and do this the analog way, you will need 100 envelopes, a pen, and a container to store your envelopes.
How much is $1 a week for a year? ›
All you do is start with $1 in Week One. Then every week after that you add $1 to the amount you're saving for the week. That's it! If you do this, you'll have a cool $1,378 extra in one year's time!
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.
What is the envelope challenge for savings? ›
100 Envelope Challenge
To begin, gather 100 envelopes and sequentially number them $1 through $100. 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.
What does the envelope method work well for? ›
The envelope method works well for those who don't want to have to write down every expense. All that is needed are some envelops, a pen and some cash. On each envelope, write the category from your budget and the amount of money you can send. The money that is allocated on the envelope can be for any timeframe.
How to save $10,000 in 3 months? ›
By following these steps and tricks, you could save up to $10,000 in three months.
- Set a goal and a budget.
- Pay down your debt.
- Evaluate and limit spending.
- Increase income streams.
- Make lifestyle edits.
How to Save $5000 in 3 Months [2024]
- Create a Budget and Plan.
- Pick up a Side Hustle.
- Sell Things Around Your Home.
- Refinance Debts.
- Cut Unnecessary Expenses.
- Reduce Living Expenses.
- Try an Envelope Savings Challenge.
- Use Cash Back Apps.
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 does the 52 week envelope 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!
How to start cash envelope system? ›
How the Envelope Budgeting System Works
- Step 1: Add Up Your Monthly Income. Before you can begin using the envelope method to budget, you need to know your net monthly income. ...
- Step 2: Set Budget Categories. ...
- Step 3: Assign Budget Amounts to Each Envelope. ...
- Step 4: Spend the Cash in Each Envelope.
