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.


Mar. 30 2023, Published 12:43 p.m. ET

five dollar bill
Source: Kenny Eliason on Unsplash

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.

Article continues below advertisement
Article continues below advertisement

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?

A person holding cash
Source: Unsplash

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.

Article continues below advertisement

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.

Article continues below advertisement
Article continues below advertisement

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.

Article continues below advertisement

Here's how to start the $5 challenge

A man printing money
Source: Getty Images

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.

Article continues below advertisement

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.

Article continues below advertisement

How to set a savings goal for the $5 challenge

A woman celebrating saving money
Source: Getty Images

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.

More from Market Realist

Latest Personal Finance News and Updates

    Opt-out of personalized ads

    © Copyright 2024 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.