Should you really do a savings challenge? Are they really effective?
In recent years, money savings challenges have been taking the internet by storm. From a few hundred to a couple thousand dollars, this tactic turns saving money into a bit of a game as a way to encourage people to put aside some funds.
If you have not done one yourself, you most likely have heard of some. Here are a few examples of some common challenges:
No matter the savings challenge or the name of it, they all have one end goal: save money. But, as with diets, are these saving challenges really a solution or are they just a temporary fix to a bigger problem?
Multiple studies, like this one that states respondents would not even be able to cover a $400 emergency expense without borrowing money, show that Americans notoriously do not save money as well as they should. Although this problem shows signs of decreasing with this new report from the Bureau of Economic Analysis stating that income and spending have increased, individuals still need to watch their savings.
As with anything, you need to set clear goals before starting something new. Want to lose weight? OK, get specific. How will you follow through? Whether or not a savings challenge works is up to the individual doing it. This route can be a great way to force you to begin saving or even start that emergency fund you’ve been putting off; you just need to stick with it. Saving money is not a one and done deal. In order to get the most out of these challenges, you need to be consistent.
With that noted, there are reasons to do and not to do a savings challenge. They are as follows:
Reasons Not To Do A Savings Challenge
You shouldn’t do a savings challenge if:
- You have no plans on saving for the future.
- You don’t need financial accountability.
- You have a strong grip on your current savings strategy along with a plan in place.
Reasons To Do A Savings Challenge
You should do one of these challenges if:
- You need to improve and increase your spending awareness.
- You recognize you need to start saving more.
- You have no savings plan in place.
It’s important to acknowledge that these money challenges are great, but they are not the final solution. If you keep up with the 52-week challenge, that’s impressive. However, it should not be used as your primary retirement plan.
The savings challenges are effective in bringing attention to your finances, but you should still have a strong budgeting system in place. In fact, before beginning any type of challenge,it is highly recommended to work on a budget first and foremost. Without one, it will be very hard for you to develop any type of plan to save money as you will be going into it blindly.
Only you can decide if you should do a savings challenge or not. They do help with bringing in extra cash, but determine your reason for doing one prior to starting. You should also make it a goal to graduate from the savings challenges to a legitimate plan that will truly take your finances further.
Have you done a savings challenge? Did you find it to be effective?