Chris Scott
Contributing Writer at Tally
November 11, 2021
It can be a challenge to find a money management plan that works for you. Everyone has different financial goals and habits, and what works for one person may not necessarily work for another.
That's why there are different budgeting strategies available. When formulating a budget, one thing to consider is how much you’re going to contribute to savings.
One of the savings strategies that's growing in popularity is the 52-week money challenge. This weekly savings plan helps you grow more comfortable with saving more and spending less. By establishing a savings habit, putting money away becomes easier over time.
In this story we’ll:
Cover why saving money is so important
Establish a weekly savings plan by using the 52-week money-saving challenge
Explain what the 52-week challenge is
Establish how much you can expect to save each week
Teach how to build a plan that you can stick to over time
By the end of this article, we hope that you have the tools needed to increase the amount of money in your savings account.
Why is it important to save money?
Saving money is important for a few reasons. For one, it helps you set yourself up for retirement. The more you put away now, the more likely you are to have enough money to retire comfortably. This is primarily because of compounding interest.
Banks and credit unions pay you to keep money in their savings accounts. The interest you earn is added to your existing balance. Your next interest payout is based on this new balance. This is one way to earn extra money.
If you choose to keep your savings in an investment account, you can also benefit from compounding interest. Though you take a risk by putting money into the stock market and subjecting it to economic fluctuations, your wealth should build over time. The average return of the S&P 500, for instance, was 11.71% between January 1, 1990, and December 31, 2020. Before investing be sure to speak to a financial advisor about a personalized strategy.
Setting savings goals is also important because it can reduce the chance of future debt. One of the first goals a new saver should have is establishing a rainy day or emergency fund. This way, you have money in your bank account for when an unexpected expense arises. In turn this can prevent you from borrowing money, in the form of a credit card or personal loan, to pay for these expenses.
Credit cards have high interest rates that compound. If you don’t pay your statement balance in full by your due date, you’ll begin accumulating interest. This interest is added to your balance, making it harder to pay off the entirety of your debt. When your credit card interest builds, you ultimately cut down on your income and monthly savings rate.
By having a rainy day or emergency savings amount, you can pay off your balances in full to cover unexpected expenses. Having enough cash on hand to cover emergencies is a fundamental aspect of financial planning.
What is the 52-week money challenge?
The 52-week money challenge breaks your savings goals into 52-week increments (every week in a calendar year). Each week, you’ll increase your savings amount by one dollar.
For instance, during the first week of the challenge, you’ll save $1. During the second week, you’ll save $2. Thus, you’ll have $3 in your savings account after two weeks. The third week calls for you to put $3 in savings, and the fourth week you’ll save $4. By the end of the month, you’ll have $10 in savings.
By the end of the challenge, your weekly savings rate will max out at $52.
How much can I expect to save?
If you use the 52-week money challenge method, the most you’ll save is $52 per week. However, the goal is that you get more comfortable saving as each week passes. Under this plan, you don't need to find a large amount of extra cash each week. All you need to do is come up with one extra dollar per week. As you grow more comfortable with saving, you establish good financial habits that you can build upon going into the next year.
Though it may not seem like increasing your weekly deposit by a single dollar bill will make a difference each week, if you complete the 52-week challenge, you’ll save $1,378 by the end of the year.
This challenge doesn’t account for any interest you may earn. The amount of interest you earn will vary depending on the type of savings account. For example, you're likely to have a higher interest rate with a high-yield savings account, typically offered by an online bank.
How can I stick to a weekly savings plan?
Whether you use the above 52-week challenge or an alternative method, the most important thing is to remain diligent. This is easier said than done at times, especially when "life" gets in the way.
One of the best savings ideas is to put your money in an account that's not your checking account. Doing so isolates your savings and reduces the temptation to spend this money. It also allows you to set up accounts to match your goals. For example, you could have one account for an emergency fund and another for a down payment on a house.
There's a good chance that you'll earn more in interest in a savings account than you would in a checking account. There are a few different types of savings accounts available, so you should take the time to research the one that best meets your goals and money management style.
You could also benefit by setting up automatic transfers into your savings account. This way, you don't have to think about saving money. For instance, you can set up an automatic transfer each time you receive a paycheck. You won't see this money in your checking account, which means you won't be as inclined to spend it.
However, it's important to note that this may not work as well if you're doing the 52-week money challenge. That's because you would have to go in and change your savings rate each week. You’ll likely have to transfer the money manually into your savings account each week if you’re doing this challenge.
Improve your personal finances by saving money
Saving money can set you up for long-term success. It not only allows you to start building a retirement fund, but it can also prevent you from taking on debt, as you'll have cash on hand to cover unexpected expenses.
One way to save money is by establishing a weekly savings plan. The 52-week money challenge is a weekly savings plan that calls for you to save just one extra dollar per week. If you stay diligent with the plan, you'll end up having saved $1,378 by the end of the year.
If you’re currently in credit card debt and don't think that you're in a position to save money, check out Tally's† credit card payoff app. This app can help you meet your due dates on all of your credit cards and potentially help you pay down debt faster than you would on your own.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.
