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Savings Plans — Does the Envelope Challenge Work?

We’d all jump at the chance to put away over $5,000 in 100 days, and that’s what the envelope challenge promises. But is it really the best way to save?

January 6, 2022

If you’ve browsed any personal finance content, from TikTok to Twitter, you might’ve come across something called the envelope challenge. Or maybe you heard about it from a friend. Whatever the backstory, the idea of saving thousands of dollars in such a novel way no doubt caught your attention. 

The initiative is also known as the 100-day money challenge, and it’s all about saving money by following a unique envelope system. But maybe you’re skeptical about whether it works, or you wonder if there are better strategies to help you save more. We’ll cover all this and more.

What is the envelope saving challenge?

The idea behind this money-saving challenge is simple. Gather 100 envelopes and label them with numbers one to one hundred. Then, shuffle the envelopes like a pack of cards and keep them in a box or container.

After this, the fun begins. For 100 days, take out an envelope at random every single day and save whatever the corresponding number tells you. Draw an envelope with the number three on it? You have to save $3 that day. That might sound easy enough — but draw number 95, and you’ll have to put away $95.

Part of the challenge’s appeal is how easy it is to get started and save a significant amount of cash. After all, the only things you need are a pen and a bunch of envelopes you can order on Amazon, right? Well, as we’ll soon reveal, it’s not quite that simple.

How much will you save with the envelope challenge?

If you’re scratching your head trying to work out exactly how much you’d have at the end of the 100 days, we did the math. If you complete the challenge, you’ll net $5,050 before the 100 days are up. 

Not a bad result. That’s a perfect amount for you to use as an emergency fund or even a significant contribution to a down payment

However, we did say there’s a caveat to the challenge’s apparent simplicity. If you don’t have the disposable income to put this much money aside in the first place, the challenge won’t change that.

Considering the real median earnings for U.S. workers was $41,535 in 2020, and the personal saving rate was 13.7%, it’s fair to assume the average person saves about $5,690 annually. It’s doubtful that many people can afford to put almost all of this aside in just 100 days.

What is the difference between the 100 envelope challenge and the 52 envelope challenge?

There are a few challenge variations. One is the 52 envelope challenge (also known as the 52-week money challenge). With this challenge idea, you save a fixed amount over a year that proportionally increases with each week. In other words, you save $1 on week one, $2 on week two and so on.

You can also use numbered envelopes to complete the challenge or move the extra money from your bank account to a savings account. Either way, you’ll end up with an extra $1,378 at the end of the year — a lower dollar amount than the 100 envelope challenge, but still a decent amount of extra cash.

Is the envelope saving challenge a good idea?

The 52 envelope challenge might be more achievable than the 100 envelope challenge, but does that mean it’s the best way to save? Not necessarily. All variants of the envelope challenge share the same drawbacks.

It’s not just that the average person lacks the capacity to put enough money aside. These challenges also fail to get to the root of why you might be struggling to save. It begs the question: What could you do to save more? 

Steps to consider instead

Again, we’d never say that saving money is a bad thing, and if the envelope challenge helps you do that, then go for it. It’s certainly a fun way to build up a stash — but that doesn’t make it a fail-safe plan for creating a better financial future. 

There are other financial goals to think about, and here are two that should be at the top of your priorities list. 

Creating a budget

Ultimately, a dependable way meet your savings goals isn’t to follow some arbitrary guidelines about how much to save each day (or week) — it’s to create a budget. What are you spending your money on? Are there areas you can afford to spend less? Bearing all that in mind, how much can you manage to save?

To help you work this out, consider using a budgeting app like Mint. Connect your accounts in the app to automatically track spending. This can help you find ways to reduce your expenses. 

For example, you might realize you’re spending too much on entertainment by paying for multiple streaming services and that canceling two of them would give you an extra $20 a month to save.


Pay off debt

When creating a budget, pay attention to where your money is going. And if you have debt, like credit cards or personal loans, you’ll need to contribute a certain amount of your income to make your monthly payments. 

This affects how much you can afford to save, so paying off debt should be one of your priorities. 

Whatever you do, try to make minimum payments on all your debts. But if you have anything left over, you can use it to follow the debt avalanche method: Identify the debt with the highest rate and throw any extra cash you have at paying that off first while making minimum payments on your other debts.

So, if you have a credit card with an APR of 23% and a personal loan with an APR of 17%, you’d pay the credit card off in full before you move on to the personal loan. And once they’re both paid in full, that’s when you can think about saving more.

Let’s seal the deal

So, to participate in the envelope challenge or forfeit it and focus on different financial goals? Whatever you decide, don’t forget the importance of budgeting and paying off any debt.

If you currently have credit card debt, an extra tool that could help you pay it off as quickly and efficiently as possible is the Tally† credit card repayment app. To save you having to work out what you should pay off when Tally simply consolidates your higher-interest credit card debt into a single lower-interest line of credit. It’ll also manage all your payments to avoid unnecessary charges along the way.

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.