This is a pretty simple way to save. Pick a denomination of paper money. The common denomination to pick is one dollar, but some people choose $5 or $10. For this example, I’m going to use the $1 bill.
Every time I go shopping, I pay in cash. But when I get change, I take all the $1 bills I have received back and put them in a separate part of my wallet. If I go to another store, I don’t spend those $1 bills. When I get home, every $1 bill that I have gets put in a jar, envelope, or box. After a while, I will have a decent amount of money set aside.
Choosing which denomination to target for The Paper Money Savings Challenge is probably the hardest part of the challenge. If you choose $1, you probably won’t notice the dent in your spending money quite as much, but you’re also saving quite a bit less, so it will take longer to accumulate a substantial amount of money. That said, it’s not a bad place to start, and it will probably be fun to watch the cash accumulate in your savings stash. A big pile of $1 bills looks pretty impressive!
If you pick $10, you will certainly notice the dent in your spending money. The big question here is how many $10 bills you get in your change. If you don’t find that you have that many, you won’t end up saving all that much.
I think $5 is a good balance of the two. It’s not uncommon to get a $5 in change. You will notice the missing cash in your spending money, but that’s not a bad thing. And the savings will add up a bit more quickly as well.
Unlike some of the other savings challenges I have discussed recently, this one doesn’t give you a set amount of money at the end of the savings period. That’s both good and bad. If you’re saving up for something and need a specific amount of money by a certain time, this probably isn’t the best challenge to help you meet your goals. But you also aren’t pressured to save. Is money tight this week? Well, you’re probably not going out and spending money, so you also won’t be pulling money out of your wallet to put into savings.
One very easy pitfall to end up in is letting that jar, box, or envelope of cash taunt you. It’s just sitting right there. Instead of going to the ATM to get cash, it’s so tempting to just pull out of the box. Maybe you need to pay the pizza guy or give your kids their weekly allowance. Do not let the temptation get to you! Do not touch the money in the savings pot. And make sure that you are keeping it safe. A cache of cash just sitting around is a thief’s greatest dream.
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.