Is the '100 envelope challenge' a smart money move?

Is the ‘100 envelope challenge’ a smart money move?


Good old school saving has gone viral.

It’s referred to as the “100 Envelope Challenge” on TikTok, and it guarantees to place greater than $5,000 in your pocket in simply 100 days. Billed by influencers as a enjoyable, straightforward technique to save money, it’s geared towards younger traders going through larger hire and grocery payments, scholar mortgage debt, and a common feeling of by no means having the ability to make the money final the month.

It works like this: Label 100 envelopes from one to 100. Since that is social media, in any case, mentioned envelopes ought to look actually cool for the movies. On day one, put $1 in envelope 1. On day 2, put $2 in envelope 2. Continue this manner till day 100, when your remaining financial savings deposit of $100 will convey you to a grand whole of $5,050. Cue the exuberant movies with piles of money. One girl claims to have finished it thrice and saved $15,000.

It’s buzzy, however is it sensible? Not actually.

First, the place is the money coming from? Some individuals don’t even make $5,000 in 100 days. And, in keeping with Bankrate, 57% of US adults can’t afford a $1,000 emergency expense. When damaged down by technology, GenZers and Millennials usually tend to be nervous about masking primary bills, not to mention stashing some away.

Second, the problem is backloaded. Savers must put away virtually $500 in the final week.

Third, the concept of stashing 5 grand in a field beneath the mattress simply appears a little sketch. It feels a bit like a fad eating regimen or make-up pattern that appears nice whenever you scroll however exhausting to realize by yourself.

There’s no query TikTok presents an abundance of questionable monetary recommendation. But given how widespread the envelope problem has turn into, I made a decision to ask licensed monetary planner Doug Flynn of Flynn Zito Capital Management for his take.

“I’m all for no matter it takes to get individuals speaking about saving money. That’s a good factor,” he informed me.

“But it’s gimmicky,” he mentioned. “It’s laudable to attempt to put some money away, however it doesn’t really feel very aim oriented to me. What are you saving this money for?”

He notes the envelope concept is definitely an old-school monetary planning device — one envelope for trip financial savings, one for the automobile fee, one for eating out, and many others.

But the envelopes in the present day are extra metaphorical in an period of on the spot account entry and budgeting software program.

And he questions the sustainability of the remaining week of the problem. “Think about the performance of the final 5 days — who’s really going to have the ability to give you $500 in the final week? Where is a GenZer going to go and discover $98 in the present day and $99 tomorrow?”

Even when you have some superb facet hustle or can promote Grandma’s jewellery, there are extra viable methods to develop a respectable nest egg.

The extra sustainable plan is to save lots of $5,000 over the course of a 12 months, constantly, and placing these funds in an funding account or financial institution or credit score union. Saving $13 a day equals $5,000 in a 12 months, not together with the curiosity. Save $5,000 a 12 months beginning at age 25 and, at common market charges, that grows to greater than $1.1 million by age 65.

The envelope problem movies have a get-rich-quick aptitude that’s actually viral and entertaining, however clearly the exception, not the rule.

“How many individuals will get previous the second week?” Flynn asks.

Here’s the extra boring, and sustainable problem. Get as much as $10 a day and keep there. Slowly edge as much as $15 a day and take into consideration the place to park it. You wish to periodically add into that financial savings. $15 turns into $5,000, and $5,000 into a million.

It’s extra boring, it takes extra time, it’s extra constant — however it has extra lasting outcomes, says Flynn.

— CNN’s Kevin France contributed to this report.