Why Savings Challenges Don’t Work

Savings Challenges don’t work…for me. Let’s be real. If you’re like me, you spend a lot of time browsing Pinterest for money saving tips, budgeting hacks, lifestyle changes, and more. Every once in a while I stumble upon a savings challenge that claims that if you follow their monthly amounts, you’ll “save 1,000 this year”. It looks great! Who couldn’t use an extra $1,000? I know I could.

But it won’t work.

Now, before I get into the “why”, I want to make it clear that these challenges are not all bad. Anything that motivates you to save is a good idea, and maybe this will be a step in the right direction for you. BUT, if you are budgeting as you should be, then these plans will not work.

Also, let me be clear in saying that savings plans do work! You should have a savings plan. But a savings challenge? Perhaps not.

Savings Challenge vs Savings Plan

A savings challenge is something that is designed to stretch you and get you to save more money. An amount that will get you to a total that really great, like $1,000 in a year. They usually sound flashy and catch your attention because they say you can reach a goal in a short amount of time.
The challenge is designed by someone who picked an amount and some monthly goals and didn’t look at you or your situation.

A savings plan is a specific amount that you save each paycheck towards a goal. Pre-determined, and based on your income and expenses. The plan was designed by you for a purpose.

For example, here is my savings plan for our holiday gifts fund. We save a specific amount out of each paycheck to pay for gifts. It’s based on what we’ve spent in the past, based on our income, and our needs.

Both can be beneficial. I know that before I started budgeting, a savings challenge would have a been a great idea! I had money to save because I wasn’t tracking each dollar, so I probably could do it. But, if that’s you…get yourself a budget!

Here’s why savings challenges don’t work

1. They bank on the fact that you have extra cash lying around. If you are budgeting the way you should be, every penny of your income should be happily allotted a place in your budget. Where is the extra money coming from?! These plans go from as little as $5 a month to much more than that. Maybe we can skim off $5 here or there, but anything higher than that should be allocated to your budget already.

1. They assume that as the year goes on you have MORE extra cash lying around. I saw a plan once where January I had to save $25, but by July it was $150! If I can afford to save $150 in July, shouldn’t I be saving that every month? Where is the extra money coming from, and why is it more in July? The inconsistency is very difficult to maintain, particularly in amounts that high. In my humble opinion, you’d be better off re-evaluating your budget and coming up with a consistent amount each month to save. Which leads me to my last point…

1. The amounts are totally arbitrary. Many of these plans are inconsistent from month to month. Someone decided on an amount to save, and something like $1,000 sounds really good in a large chunk, but then the monthly or weekly amounts are completely random. One went as far as to just take the amount and divide it by 12 months, math that I hope we all could have done on our own.

Now, again, don’t get me wrong…anything that gets you to save is AWESOME. These are not totally bad plans, it’s just that they will not work for me! I set my savings goals based on what we need and want to do, and then we account for every penny. There is no extra money for these plans in this budget.