As the new year approaches, many Britons are looking for engaging ways to improve their financial health. With interest rates falling, finding a high-paying savings account is tougher, but creative savings challenges offer a fun alternative to build a cash reserve.
Popular Savings Challenges Explained
These methods are not the most effective long-term wealth-building strategies, but they excel at helping individuals establish a consistent savings routine. We've compiled the top seven viral challenges and sought expert opinion on their real-world efficacy.
The Envelope Challenge
This involves labelling 100 envelopes with numbers from one to 100. Each day, you randomly select one and place the corresponding amount of cash inside. By the end, you could save a few thousand pounds. However, Rachel Springall, a finance expert at Moneyfactscompare.co.uk, cautions that holding physical cash means missing out on interest while inflation erodes its value. "You may be better off using a regular savings account," she advises, suggesting an easy-access account for those needing a weekly habit.
Revenge Saving & The 1p Challenge
Revenge saving involves setting aside cash equivalent to the cost of any guilt-inducing purchase. Sarah Coles, head of personal finance at Hargreaves Lansdown, notes it can curb spending on targeted habits or retailers, but warns against overuse. Springall adds that it can create negative associations and stresses that clearing high-interest debt should usually take priority.
The classic 1p savings challenge starts with saving one penny on day one, two pence on day two, and increasing the amount daily. It's a gentle start, but Coles points out it becomes demanding later, requiring over £3 daily near the end. She suggests reversing the order for a psychological boost if your budget is tighter post-Christmas.
Building Sustainable Financial Habits
No-Spend Periods & Reverse Budgeting
Choosing a day, weekend, or week to avoid spending entirely can act as a valuable reset. Vix Leyton, a consumer expert at thinkmoney, says it highlights autopilot spending, especially with contactless payments. Coles warns it only works if you actively seek cost-free alternatives and move the unspent money into savings, rather than just deferring purchases.
Reverse budgeting, or "paying yourself first," flips the traditional model. Leyton explains it frames saving as a non-negotiable priority, taken from your account before other expenses. The key is setting a realistic, affordable amount to avoid dipping back in later.
Automation & The Mobile Audit
For those who find challenges too laborious, automation is a powerful set-and-forget tool. Setting up a direct debit to transfer money to a savings account on payday ensures consistency. Coles confirms, "It doesn’t have the novelty of a savings challenge, but it can be incredibly effective." Apps like Moneybox round up spending, while tools such as Plum use AI to calculate affordable monthly savings.
Finally, a thorough mobile audit of your banking and payment apps can uncover forgotten direct debits for unused subscriptions or lapsed free trials. Leyton recommends reviewing payments regularly, separating subscriptions, and introducing friction like disabling one-click payments to curb impulse buys.
Remember, when investing, capital is at risk and past performance does not guarantee future results. For straightforward saving, ensuring your cash is in an interest-bearing account remains a fundamental step alongside any challenge.
