Social media and consumer advice websites seem to have become obsessed with new ways of helping people to save in ever more novel ways.
Many of these aspirational posts ask people to set themselves some truly odd challenges to help them save more money.
One popular iteration of this is the 52-week saving challenge.
The idea of this approach is that incremental increases in the amount you save are less noticeable – whether that is true given the current cost of living crisis is less clear.
How does the challenge work?
During the first week, you put away just £1. You then save £2 in week two, £3 in week three, £4 in week four and so on.
As you can see the costs are small, but by the end of the first month you will have saved the grand total of £10.
Of course, this continues to accumulate until week 52, by which point you put away a maximum of £52 a week.
In this final month, you will have to save £202, and in total, if you stick to the challenge, you will have £1,378.
This isn’t a bad approach you might think, but what you do with the money when put aside isn’t expanded upon and in most cases, the articles, posts and videos that promote this idea don’t offer any real investment advice.
Other popular challenges
There are many other challenges along similar lines, such as saving £5 more every week.
This is more ambitious and means that by week 52 you are having to find £260 to put into your savings.
The envelope challenge is also popular and asks you to purchase 100 envelopes with a number between one and 100 written on them.
Each week you pick a couple at random and stuff the envelope with that amount and put it away.
With this method, you could save up to £5,000 in 12 months, without finding the apparent sting of having to find the additional cash to set aside each month.
In fact, all the ideas are based on the psychological concepts around gradual change.
The flaw with many of these systems is that it doesn’t account for variations in earnings and spending. Some months you may earn more, spend less or vice versa – what happens if you can’t find the cash to put away hundreds of pounds each week?
This might be easier for influencers than some of us with busy lives, sudden expenses or dealing with rising costs.
What’s more, these ideas, as mentioned, do not give any advice on what to do with the money that is being squirrelled away, and some instead even suggest hiding it in a box to empty at the end of the year.
That is money that isn’t earning any interest or doing anything useful, not least until it is counted and deposited 12 months later, by which point you may miss out on compounding interest and potential tax reliefs through clever investment.
A better approach?
Some of these challenges effectively ask you to save around £400 a month. If you can already do that, why not just deposit into an ISA, savings account, or another form of investment?
It would even be better to put that additional income in your pension tax-free to boost your retirement savings, rather than having it sit in a box in your home.
Of course, for those pushing these ideas, this approach doesn’t win them the views and admiration of their audience, but as a saver, it does mean that your money is secure and accruing value.