Here at Savinly, we’ve got a bit of an affinity for Abraham Lincoln.
After all, his portrait graces one of our favorite bills.
But while we adore our pennies, we also don’t mind spotting Lincoln’s bearded face on the $5 note. And squirreling away $5 bills can be far more rewarding than hoarding loose change.
How the $5 Challenge Helps You Save
The five-dollar challenge is an easy savings tactic that requires almost no brainpower or effort. You won’t need to crunch numbers. You won’t have to drastically cut your spending. And you won’t be forced to set aside huge sums each month.
The whole idea is simply to tuck away every $5 bill you receive in change. That’s all there is to it.
If you pay for something and the cashier hands you a bill with Lincoln’s familiar face, don’t spend it on a latte or a quick meal from the drive-thru. Set that $5 bill aside for your savings.
Depending on how long you stick with the challenge, you could accumulate a significant amount. Five-dollar bills add up fast. Saving just two $5 bills per week will amount to $520 over a year. Because the amount is small, your stash can grow without you feeling deprived.
Starting balance
Monthly contribution
Length of time
Months
Years
Annual interest rate
Where to Store Your Cash
Keeping your $5 bills separate from your everyday spending money is essential to the challenge’s success. Many people who try this save their bills in jars, envelopes or even shoe boxes. Think of it as a grown-up piggy bank.
You can track your balance as you go or wait until the challenge finishes to be pleasantly surprised by the total.
If you’d rather not keep extra cash at home, make regular deposits into a savings account. This keeps your funds insured, prevents easy access to the money and can even earn you interest — particularly if you choose a high-yield savings account.
Doing the Challenge Without Using Cash
If you primarily use a debit or credit card, the five-dollar challenge can still work for you — it just takes a little extra effort.
When you buy something, mentally calculate what change you would have gotten if you’d paid with cash. For example, if your store total is $84.25 and you would have handed over $100, you’d likely receive a $10, a $5 and 75 cents back. Before you leave the parking lot, log into online banking and move $5 into your savings.
To simplify, you could commit to transferring $5 to savings each time you swipe your card. Or be selective and only add $5 for certain purchases, like when you fill up your gas tank.
Another approach is to switch to cash just for discretionary spending. Continue using your card for groceries and household items, but pay with cash for shopping or dining out. Any $5 bill you get back goes straight to your savings.
The cash-envelope system is a solid budgeting tactic for cash users. If you rarely carry cash, here’s how to adapt the cash-envelope approach to suit your habits.
Tailoring the Five-Dollar Challenge
If setting aside $5 bills doesn’t suit you, tweak the challenge while keeping its core idea intact.
Save every coin you receive as change (piggy banks aren’t only for kids), or stash all the $1 bills you get back.
Choosing a smaller denomination doesn’t necessarily mean you’ll save less. If you happen to receive more $1 bills than $5 bills in your change, you might wind up saving more overall.
Give Your Savings a Purpose
Whether you plan to follow this challenge for a few months or an entire year, it helps to have a plan for what you’ll do with the money.
You might treat yourself to a vacation or buy something you’ve been wanting. Or you could put the money toward something more aligned with your financial goals, like chipping away at student loans or credit card debt.
Having a clear objective for your savings will help keep you motivated to stay consistent — and resist dipping into your stash before the challenge ends.
Alex Carter is a former senior writer at Savinly. Senior writer Marcus Hale updated this post for 2023.
