How to save money: Savers could set aside £5,000 via envelope challenge
Martin Lewis discusses UK regulated savings accounts
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As restrictions lift, Britons are being faced with twice as much opportunity to spend as they’ve had in the last six months. Yet many are still trying to save after an economically turbulent 18 months, and the envelope challenge is considered by some as one of the best ways to do so – without even noticing the money leave your budget.
All that’s required for this challenge is 100 plain envelopes and a box to store them all.
On each envelope write one number from £1-£100, and every week/month/day, depending on how quickly one wants to save, pull out one envelope from the box.
Say the envelope pulled is £54, put £54 in the envelope and place it somewhere safe.
This allows one to save whilst still having a bit of ‘wiggle’ room, depending when which envelope is drawn, to enjoy what the summer sun and open business markets have to offer.
Using this simple trick is intended to keep people from overspending or wasting money on impulse purchases.
It also keeps the money out of sight and out of mind so, most won’t even notice it’s there until they have to pull another envelope.
Filling all the envelopes results in savings over £5,000.
However, this challenge can also be tailored to one’s saving goal.
Pulling two envelopes twice a week will garner this savings amount in just over six months, whereas pulling four envelopes twice a week will see £5,000 saved in only three months.
The envelope challenge relies on a mathematical formula from the 18th century, discovered by Carl Friedrich Gauss.
While the saving challenge had its turn in the virtual spotlight late last year, many critiqued it as too simple to be true.
The only limitation with this saving technique is the fact that the money is ‘untouchable’ once sealed in the envelope, as people must stick to their budget.
Furthermore, one must keep in mind to not ‘over-save’ by putting away money which may be needed to make it to the end of the month.
It’s also crucial that the money is kept in a very safe place, and paying the sum into an easy access bank account is one option to do this.
While it may be tempting to know that a certain amount of money lies not too far away, the challenge does limit the amount available to spend on negotiable expenses and impulse purchases.
These types of expenditures may start out as just a small amount here and there and result in hundreds of pounds spent recklessly every month.
The envelope challenge also challenges one to see how flexible their expenses are.
For example, if it’s nearing the end of the month where money is tight and the £100 envelope is pulled, people might start to think twice about going out that night or buying coffee on the commute to work instead of just making it at home.
The challenge can also be either repeated or doubled if one’s income allows.
The amount of envelopes used is limitless, meaning the amount you could save through this technique is too.
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