Have you heard about the 52 week savings challenge? Apparently this challenge has been pretty popular on social media sites and there are some pretty creative money jars out there on Pinterest and Facebook. It wasn’t until a recent financial planning consultation that I’d ever talked to someone actually using this approach and it came up again in multiple sessions with others just last week.
The concept is quite simple. You deposit $1 into your savings account during the first week of 2014, $2 during week two, $3 on week three (okay I’m sure you get the idea now). During that last week of December, the final deposit of $52 would be made, resulting in an end of the year balance of $1,378. Just in case you are late to the game like me, it is now week #10 so you will need to go ahead and deposit $55 if you are looking to play some catch up.
This isn’t “quit your job; you’re filthy rich” kind of money but it’s a great start for most people. With personal (and national) debt concerns so prevalent these days, any savings plans that people will stick with is a good thing in my opinion. How much should we ultimately be saving? For emergency savings, most financial planners recommended keeping anywhere from 3 to 12 months of basic living expenses in a savings account separate from the day to day checking account. However, for people trying to pay down significant amounts of high interest debt, it is often recommended to first build up a small “starter emergency fund” of $500 to $2,000 and then knock out the costly debt. Once those annoying cards are gone, you can then focus on ramping up that emergency fund.
Is the 52 week savings challenge the best way to go about ramping up your savings? In my opinion, there are faster and better ways to save but I like the fact that the 52 week challenge creates a system and uses good old fashioned peer pressure and accountability with social media. The social aspect is important and so is the visual component of writing down goals and automating the savings process.
Perhaps the most important aspect of the challenge is that you are committing yourself to saving on a regular basis. If you are already committing yourself to saving $202 during the month of December ($49, $50, $51, $52) why wait until then to make such a big change? Saving $50 per week will nearly double your year 1 savings and over a 5 year time period, will add up to about $13,000 ($13,330 estimated total at 1% interest).
Nevertheless, I still love the concept because it is a genuine savings plan that you can track. If you are looking for some other strategies, here is an article that outlines some other ways to build up savings. My wife and I love the plastic (the debit card version at least) and use the round up feature with our bank that puts $1 into savings every time we use our cards (we saved an additional $900 last year…kind of eye opening when you realize how often we make those debit card purchases). We also got so used to making those regular car payments that when our last vehicle was paid off in full, we kept making those payments…to ourselves in the form of savings. This helps us build up a nice little car replacement fund over time, although my goal is to drive the car as long as it will keep moving in a somewhat reliable manner.
As a financial planner, I realize most of us know what to do with our money…it’s the following through with behavioral changes that is the hard part! That is why the number one key to creating (and following) a successful savings plan is to make it automatic and put savings first in your spending plan. That is the best way to make savings a habit.
Speaking of savings…Did you know that this week is America Saves Week? Just in case there isn’t a parade scheduled in your hometown, you can still celebrate by reviewing your savings plan. If you aren’t actively saving (or regularly dipping into that savings account) pledge to save today. Set a goal and make a plan. Be sure to assess your progress over time. Whether you are printing out one of the 52 week savings challenge forms, setting up savings goal reminders on your smartphone or sites like Mint.com, or using this Saving for Goals calculator, the main idea is to have a plan and put it in writing.
I also find that it is helpful to visualize your financial goals. This adds more meaning and purpose to the entire planning experience. A friend of mine went through a “get his financial life on track phase” and created an entire poster board with visual reminders of the things that matter the most to him. He also added some incentives like a picture of his dream home and a few snapshots of a tropical island that he was saving up money to go visit. Whatever it takes to stay motivated, I say go for it and save, save, save.
How about you? Are you participating in the 52 week savings challenge this year? What are some other strategies you are using or challenges you are participating in to ramp up your savings?