If you’re looking for a creative way to boost your holiday budget or jump-start an emergency fund, the $5 bill challenge could become your new favorite money trick.
The premise is simple: every time you receive a $5 bill, you keep it. What starts out as loose change can turn into hundreds of dollars almost effortlessly.
Do you want to try the $5 bill challenge? Here’s what you need to know.
If you’re new to saving money, participating in the $5 challenge can be an easy way to get started.
Here’s how it works: Every time you get a $5 bill, you put it aside instead of spending it, whether it’s cash at the store, change from a purchase, or on a birthday card.
Some people commit to the challenge for a month, a year, or until they reach a specific savings goal. There are really no rules about how long or how much you should save. The goal is to make saving money fun and manageable.
“The $5 challenge is basically a savings habit disguised as a game,” said Bree Shellito, director of financial wellness at Ent Credit Union. “It works because it eliminates decision-making. You don’t have to ask yourself, ‘Should I save this?’ Just do it”.
Of course, no savings challenge is one-size-fits-all. There are several key pros and cons to consider before undertaking this type of challenge.
Advantages:
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Low effort: The $5 saving challenge is simple—you don’t need apps, spreadsheets, or complex rules. Its simplicity makes it accessible even to people who struggle with traditional saving and budgeting.
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Non-restrictive: Because it works in small increments, the challenge helps people save money without making major lifestyle changes. And this small but consistent savings approach can add up faster than you might expect. “For someone who handles cash daily, you can accumulate a few hundred dollars surprisingly quickly, sometimes $500 or more in a year without feeling the pressure,” Shellito said.
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Ideal for cash carriers: The $5 Bill Challenge is ideal for people who use cash as their primary payment method, as they will likely build up savings faster than those who prefer to spend with debit or credit cards.
Read more: 5 Common Mistakes People Make When “Hoarding Cash”
Cons:
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Savings may be inconsistent: Some weeks, you might save several $5 bills. Other weeks, you may not save anything. The unpredictable pace makes it difficult to rely on this challenge for time-sensitive objectives.
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Cash does not generate interest: Money kept at home loses value over time due to inflation. However, you can boost your savings by depositing your cash in a high-yield savings account that earns competitive interest. Plus, you won’t have to worry about your cash being lost or stolen.
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Many people today do not have cash: This challenge may not be effective if you don’t normally use cash, which is increasingly common given the large number of digital payment methods available today. According to a Capital One survey, 47.8% of respondents do not make cash purchases in a typical week and 69% used cash for some (if any) purchases during the past 12 months.
Read more: 6 times you can be charged extra for paying in cash
If you’re not a cash carrier, that doesn’t mean you can’t take on the $5 bill challenge. You may just have to make some adjustments.
“If you try to adapt the cashless challenge, it becomes less of a $5 challenge and more of a summary challenge,” Shellito said. “That means saving the change you would have received or rounding up your purchase to the next $5, $10 or $20. It’s still a solid strategy, but different from the $5 challenge.”
If that sounds like a lot of work, many banks will do the heavy lifting for you. Ally Bank, for example, offers savings tools that let you round up purchases to the nearest dollar and automatically deposit the difference into your savings account. Bank of America offers a similar savings program called “Keep the Change.”
The main thing to keep in mind when it comes to this gamified savings strategy is that while it can make saving fun and less stressful, it can also make it more difficult to reach your goals within your desired time frame. However, this does not mean that it cannot work effectively when combined with a more structured savings plan.
Read more: 6 Gen Z Savings Strategies That Can Work for Anyone
