How To Save With The 100 Envelope Challenge

Have you seen the 100 Envelope Challenge on Tik Tok? While this money-saving strategy may be trending today, this and many like it have been around for years. Let’s dive into how these challenges can save you money and help you build better saving habits for the future.

What Is The 100 Envelope Challenge?

The 100 Envelope Challenge is an easy, fun way to save money over 100 days. But more importantly, it can help you build a money-saving habit that can last you much longer than 100 days.

How Does The 100 Envelope Savings Challenge Work?

Follow these simple steps to take on the 100 Envelope Challenge.

1. Create 100 Envelopes

The first step of the 100 envelope challenge involves … 100 envelopes. Label each envelope with one number from 1 to 100. If you’d like to get even more specific you can also write a date on the envelopes. You can get as creative as you’d like with colorful envelopes, or go with classic white ones.

2. Put The Envelopes In A Container

Put the envelopes in a safe but easy to access location in your home. There are two strategies for how to organize the envelopes in the container. If you put them in order from 1 to 100, you will be able to easily plan out how much money you will put away each day. You can also mix them all up so you don’t know how much money you will need to save each day.

3. Put Money In 1 Envelope Each Day

Now the challenge can really begin. Each day, put money into an envelope equal to the number on the envelope. So on day 1, you put $1 into the envelope. On day 79, you put $79 in the envelope.

The key to this challenge is consistency. While it may be easy to put away cash in the single digits, you may not find it as easy to save larger amounts of cash as time goes by. However, this snowball effect is what brings big savings over time.

4. Count Your Cash

Once you reach 100 days, take out the envelope and count all of your cash. If you fill each envelope with the correct amount of cash, you should have $5,050 saved up in just over 3 months. 

The benefit to this system is that it can work for those trying to save more or less money by halving or doubling the amount of money they put in the envelopes each day. The key to the challenge is creating a habit to save a small amount every day so you can eventually have a large amount saved in a relatively short amount of time.

Once you’re done with the challenge, feel free to reuse the envelopes and start over again!

What Should You Do With The Cash Once You’ve Completed The Challenge?

It may be hard to convince yourself to save money for no particular reason. If you have an ultimate goal in mind while you’re saving, you may be less likely to indulge in impulsive spending. Some financial goals could be:

• Paying off debt: Paying off credit cards and other high-interest debts should be a top priority if you have the funds to do it. Debt that continues to grow will continue to weigh down your finances until you pay off the balance, potentially with a large payment from your challenge savings.
• Creating an emergency fund: Building an emergency fund should also be one of your first priorities after the challenge. This safety net is crucial to be ready for expensive inconveniences like a broken air conditioner or more critical costs like unexpected medical bills.
• Saving for a down payment: If you already have a healthy emergency fund, saving money for a down payment is another great option. Money for a down payment is one of the largest barriers to home ownership and the 100 envelope challenge can give you a big ladder over this hurdle.
• Saving for retirement: contributing to a retirement account like a Roth IRA early and often will set you up for financial freedom in the future. If your employer offers a 401(k) plan, especially if they offer to match up to a certain percentage of your contributions, that can help supercharge your retirement savings.
• Saving for a vacation: Don’t forget to stop and smell the roses. Saving money for a vacation is important to maintain a good work-life balance.

It is important to remember that saving doesn’t mean putting cash under your mattress. The value of cash doesn’t always keep up with inflation, so it is essential to take advantage of high-yield savings accounts so you can put your money to work and keep pace with inflation.

What Are The Pros And Cons Of The 100 Envelope Challenge?

Pros Of The 100 Envelope Challenge

• Save money: The most obvious pro of the 100 envelope challenge is the feeling of financial freedom you will feel when you count all the money you have saved after 100 days.
• Build better savings habits: Apart from the tangible benefits money provides, the intangible benefit of learning to build budgeting and savings habits will help you continue to build wealth long after the initial savings are gone.
• Team building: Having your family and friends support you during this endeavor and encouraging them to participate as well could bring everyone closer together.

Cons Of The 100 Envelope Challenge

• Cash dependent: We are closer to a cashless society than ever before! The need to have cash every day to maintain the challenge may make this untenable for many savers.
• Requires commitment: Some people facing financial hardships rightfully cannot follow the 100 envelope challenge.

Are There Alternatives To The 100 Envelope Challenge?

There are plenty of strategies and systems that you can try to save some extra money.

Paycheck Challenge

The paycheck challenge involves setting aside a fixed amount from each paycheck. The amount can be relatively small but still make a large impact over time. If you’re paid every two weeks and set aside $50 from each paycheck, you could save up to $1,300 per year.

Setting up automatic transfers from your checking account to your savings account on the day you receive your paycheck can make this strategy incredibly easy to maintain. This electronic method is a significant advantage over the 100 envelope challenge that requires cash.

One-Week Challenge

You don’t have to tie your savings to your paycheck. You can choose to save a fixed amount every week and watch it add up over time. For example, saving $20 each week will save you $1,040 by the end of the year.

$5, $10, $50 Bill Challenge

According to Federal Reserve data, there are fewer $5, $10 and $50 bills combined (less than 10 billion in circulation) than there are $1 bills (14.5 billion) , $20 bills (11.5 billion) and $100 bills (18.5 billion). One creative way to save money is to savor these rare bills any chance you get. So any time you come across a $5, $10 or $50 bill, put it away in an envelope until you reach a set date or until you meet your savings goal. This method is best for people that regularly receive change or tips in bills. 

A Penny A Day Challenge

A miniature version of the 100 envelope challenge is the Penny A Day Challenge. This strategy pushes you to save 1 cent per day, adding one penny a day each day. This may seem like literal chump change, but the compounding nature still leads to big savings. If you take up this challenge for a year, saving 1 cent on the first day and $3.65 on the last day, you will save $667.95.

No Spend Challenge

Not every savings strategy has to be for the long haul. If you think you’ve spent too much on nonessential items or activities, try to go cold turkey on discretionary spending for a short period of time. This can save you a surprising amount, especially if you’ve gotten used to fast food delivered to your door. This may be easy for a short period of time, but the real challenge will be avoiding a spending binge once the challenge is complete.

The Bottom Line

The 100 envelope challenge is a useful tool to help you save money. Another useful tool is the Rocket Money℠ app that you can sign up for today to learn new ways to save money each month.