Making Cents: Taking the 52-week money saving challenge

YOU might have heard about a money savings plan, called the 52-week savings challenge which in theory is supposed to be an easy-to-follow way of accumulating money over a 12-month period for those who find saving on a regular basis a hard thing to do.

The premise is simple - you save increasing amounts every week starting with €1 in week 1, and you increase your savings by €1 for each subsequent week.

An example of this is:
Week 1 you save €1

Week 2 you save €2

Week 3 you save €3

Week 4 you save €4

All the way until week 52 when you save €52 and by doing this at the end of a year you will have saved €1,378.

You record your savings typically on a chart or on an excel spreadsheet where you tick off each week the money saved. And it doesn’t have to be deposited into an account if you don’t want to, it can be placed in a jar or an envelope. Any place really where you can see it and put it away easily and safely.

The basic idea behind this savings plan is fine, but it has its limitations and the two problems I see with it from people who used it in the past are:

1. The immediate results are small. Motivation levels can wane because at week 26 when you are halfway through the challenge, you would only have accumulated €351.

2. And as you are coming towards the end of the year, the amount you have to save increases and increases by a lot. In November, for example for you to stay on track you would have to save c. €235 in that month, whereas in January you would have saved just €15, and it might be a whole lot harder to save money at particular times of the year with November and December being good examples. And of course there will be other months as well that might be difficult i.e. when kids are going back to school, if and when you are on holidays during the summer etc.

The good news is that there are many variations to the challenge that can be modified to suit you and your finances giving you more flexibility to continue to save and succeed over the long term which of course is the objective of this exercise.
My first suggestion at modifying the original idea is by doing it in reverse, i.e. start off by saving a decreasing amount each week.

Rather than save €1 in week 1, why not save €52 in week 1 and €51 in week 2, etc. because if you do this, by the time you reach halfway in week 26 you will have saved about €1,027.

By doing this you are seeing much more immediate results and you will have something real and big to show for your efforts.

If you were going on a diet plan, would you prefer to lose weight in a short period of time or lose it over a much longer period of time? Most people would like to see a quick loss i.e. lose 8 lbs in one month rather than 1 lb each month for the next eight.
And I think the same might apply to saving money because quick results motivate people.

And yes of course saving €250 in January for many people is a big ask and €15 is much easier, but the reality is that you will be more motivated and more enthusiastic at the beginning of the year when your motivational levels are at their highest. Perhaps you’ll be glad if you do the heavy lifting now because come December time, and with Xmas upon you, all you will need to save that month to hit your target is €10.

And if €250 seems overwhelming and too big an amount to start off with, then find a lesser number, but don’t go for too low an amount either. Ideally you want to find a number that hurts a little but isn’t too much of a stretch either.

Another variation of the savings’ challenge is where you save in increments of €2 each week for the first 26 weeks of the year and for the last 26 you decrease the amount you are saving by €2 each week.

And I like this method because it makes saving at the start and end of the year easier. The months where you biggest outlay are in the middle of the year, something you can plan for in advance.

Again this is just another variation on the original plan and might make it a little bit easier for people to stick to that savings habit for the whole year.

The challenge for many people using this method or any other for that matter can be that they find it difficult to save money, particularly the week before they are due to be paid. So, in order to overcome this, consider saving the entire amount in any month in one go, and that’s when you get paid and have the money.

It’s the classic, pay yourself first advice and doing it at the beginning of the month rather than in the middle or at the end, will help because you will get used to managing your income minus your savings because you can’t miss what you don’t have, or can’t see.

I remember a client saying to me a couple of years ago, that his financial life improved when he distanced himself from his savings. And what he was referring to was, when he put his money out of reach and into an account where he had to give two weeks’ notice to get it out, prevented him from dipping into and out of it on regular basis, so, automating your regular savings each week or month, and having to give notice for any withdrawals may help.

If none of the suggestions suit you then simply create your own savings challenge which meets your needs. And maybe that’s’ saving every two weeks, or maybe the amount you save is a fixed amount each week or month and it doesn’t increase or decrease. You know yourself better than anyone so create a plan that might be a hybrid of some of the suggestions I have given you, that will suit you and will give you the best chance of completing it.

And please don’t anchor your savings target at an amount of €1,378 each year which is the amount you would accumulate, regardless of the method you choose. If you can save more each month then do so, and ideally the amount you should save each month should be a % of your net take home pay.

If your household income was for example, €4,000, then you should be targeting saving at least 5% of this amount i.e. €200 each month. If you did, you would obviously have €2,400 at the end of the year, far more than the target set by this saving challenge.

I think what is really important to bear in mind and this is something I am always at pains to say, is that the amount you save is not nearly as important as (a) starting to save in the first place and (b) getting into the habit of saving on a consistent basis. Like anything, once this habit is formed, it is hard to break it.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey, Co Limerick. He can be contacted at liam@harmonics.ie or www.harmonics.ie