A way to increase your savings with little effort

If you are looking for a creative way to enlarge your body Vacation budget or jump start Emergency fundThe $5 Bill Challenge could turn out to be your new favorite money hack.

The premise is simple: Every time you get a $5 bill, you stash it. What starts as loose change can turn into hundreds of dollars with almost no effort.

Want to try the $5 Bill Challenge? Here’s what you need to know:

If you are new save moneyParticipating in the $5 Challenge can be an easy way to get the ball rolling.

Here’s how it works: Every time you receive a $5 bill, you set it aside instead of spending it, whether as cash back at the store, change from a purchase, or as a birthday card.

Some people take on the challenge for a month, a year, or until they reach a specific savings goal. There are no real rules as to how long or how much you should save. The point is to make saving money fun and doable.

“The $5 Challenge is essentially a savings habit disguised as a game,” said Bree Shellito, director of financial wellness at Ent Credit Union. “It works because it eliminates the decision-making process. You don’t have to ask yourself, ‘Should I save this?’ You just do it.”

Of course, there is no one-size-fits-all savings challenge. Before embarking on such a challenge, you need to consider several important advantages and disadvantages.

Advantages:

Low effort: The challenge to save $5 is straightforward – you don’t need any apps, spreadsheets, or complex rules. Its simplicity also makes it accessible to people who struggle with traditional budgeting and saving.
Non-limiting: Because it works in small steps, the challenge helps people save money without fundamentally changing their lifestyle. And this small but consistent approach to saving can add up quicker than you might expect. “For someone who deals with cash on a daily basis, you can build up a few hundred dollars surprisingly quickly, sometimes $500 or more in a year, without feeling the pinch,” Shellito said.
Ideal for money carriers: The $5 Bill Challenge is ideal for people who use cash as their primary payment method, as they are likely to accumulate savings faster than those who prefer to spend with debit or credit cards.

Disadvantages:

Savings can be inconsistent: Some weeks you can save several $5 bills. Other weeks you may save nothing at all. The unpredictable pace makes this challenge difficult to rely on for time-critical goals.
Cash does not earn interest: Money sitting at home loses value over time due to inflation. However, you can increase your savings by depositing your cash into an account High interest savings account that arouses competitive interest. Plus, you don’t have to worry about your cash being lost or stolen.
Many people today are cashless: This challenge may not be effective if you don’t normally use cash, which is becoming increasingly common given the many digital payment methods available today. According to a Capital One Survey47.8% of respondents make no cash purchases in a typical week and 69% have used cash for some (if any) purchases in the last 12 months.

If you’re not a cash carrier, that doesn’t mean you can’t take up the $5 bill challenge. You may simply need to make some adjustments.

“If you try to adapt the challenge without cash, it becomes less of a $5 challenge and more of a round-up challenge,” Shellito said. “This means saving the change you would have received or rounding your purchase to the nearest $5, $10 or $20. It’s still a solid strategy, but it’s different from the $5 Challenge.”

If that sounds like a lot of work, many banks will do the heavy lifting for you. Ally Benchfor example, offers savings tools that let you round up purchases to the nearest dollar and automatically deposit the difference into your savings account. Bank of America offers a similar savings program called “Keep the Change.”

The most important thing to remember about this gamified savings strategy is that while saving is fun and less stressful, it can also be more difficult to achieve your goals within the desired time frame. However, that doesn’t mean it can’t work effectively when combined with a more structured savings plan.

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