How to Save Money With the $5 Challenge: A Step-by-Step Guide
The $5 challenge has become a realistic, goal-orientated way to save more money. What is the $5 challenge and how does it work? Let's get into it.
Economic times have put a strain on how we value money, and the rising rate of inflation has caused more of a penny-pinching mindset when setting goals for how to save. While there are many tactics to save money, such as opening a savings account that you aren't able to touch, there are also solutions that help you set aside more cash.
Fortunately, the $5 challenge has become a realistic, goal-orientated way to save more money.
What is the $5 challenge and how does it work? Here's everything you need to know when looking for an easy way to save more cash.
What is the $5 challenge?
The $5 challenge involves saving $5 every time you get the amount back in change. Some people do the challenge for a certain number of weeks, while others commit to an entire year. Saving money can be a satisfying process with a good payoff in the end.
If you did the $5 challenge for a whole year, you would ultimately land yourself a spare $260 by the end of it. That's not to say that you can't save more and increase your earnings as time goes on.
How does the $5 challenge work?
The $5 challenge is an incredibly simple and nearly foolproof way to save money. The challenge is great for anyone who's determined to save more money. Taking part in the $5 challenge is fairly easy. You simply set aside $5 every week.
The savings will start to grow on their own the longer you commit to the $5 challenge. How long you participate is totally up to you (and your sense of willpower). It's understandable that life is unpredictable and can require some cash use on an emergency basis, but if you're able to not reach for $5 in a time of need, you're sticking to the challenge you set yourself.
It's rewarding to make it to the end of a set time frame and look back on your savings.
Some people take the $5 challenge to a more extreme level and double or even triple the amount of money they set aside. While the $5 challenge recommends that you opt to stick with $5 as a constant amount saved, those determined to keep more cash by the end of the year might choose to save $10 to $15 instead.
Here's how to start the $5 challenge
If you know you're ready to take on the $5 challenge, it's time to find a starting point that works best for you. The most simple aspect of setting yourself on track to save $5 each week is to do that: scrounge up any spare cash that you may have or may have been given, and set it aside. Find $5 that you'd like to start off with and you're set to go.
By doing this, you're already headed in the right direction.
While you may already know that you want to add more to your savings challenge down the line, it's wise to keep your first few weeks at $5 to make sure you're ready to commit to the $5 challenge.
How to set a savings goal for the $5 challenge
While the $5 challenge is a good motivation to start saving money, it helps if you have a financial goal in mind. When committing to the $5 challenge, it's helpful to have a reason for saving the money. On it's own, $5 doesn't seem like much, but over time, it can have some fairly impressive impact.
The $5 challenge doesn't require you to spend all your savings in one place either.
Are you setting up a college fund for yourself or a family member? The $5 challenge might be a good option to increase your savings. Is there a dream vacation that you've been dying to go on and you want to save money to make it a reality?
Perhaps you're on the road to retirement or have your heart set on a home that has been on the market for some time. For any of these examples, the $5 challenge will help you save money and work towards your goal.