As savings challenges and TikTok hacks grow more popular due to the cost of living crisis we looked into which ones actually work.
Taking part in various financial challenges has become a popular way for Brits to save money. TikTok has recently been flooded with money-saving challenges, with the hashtag moneysaving currently with nearly four million views on the app as Brits turn to it for tips and inspiration.
Many people now have easy access to budgeting and spending guidance through the app, but how effective are these viral money-saving challenges and do they genuinely work?
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Cash Stuffing
Cash stuffing or envelope stuffing is a popular TikTok challenge, which involves you cashing out your money to separate it into separate envelopes for different costs. For example, you have one envelope for food shopping, one for petrol, etc. with the idea that you can better manage your finances and prevent overspending by possessing physical money and keeping track of your purchases.
Lucinda O’Brien, personal finance expert at Money.co.uk savings, said: "Although dividing your money into envelopes each month can help you visualise your monthly spending and keep track of where your money is going, in reality, doing so won't be as efficient as putting it in a bank account where you can earn interest, especially whilst interest rates are at an all-time high right now.
"Having your money in a bank account is not only better for its safety and protection, but it's also important to keep in mind that as a cashless society develops, relying on cash for all your daily transactions will become impracticable.”
The Penny Challenge
You can save £667 over the course of a year with the penny challenge. All you have to do save 1p on the first day, and increase the amount of money you're putting away by 1p every day, so on the second day you save 2p, and so on. If you continue for a year, you will end up saving a total of £667.95.
Lucinda O’Brien said: "The penny challenge is a fun way to save those spare pennies and end the year with a decent sum of cash. It is also helpful for those who find it difficult to save money during the week because it can be the first step in helping them reach their savings goal by just saving loose change.
“If they are successful with the penny challenge and decide to raise their weekly savings, they may decide to keep the money in a savings account so they can benefit from having easy access to the money. When you save up pennies to spend, you usually have to exchange them for cash at the bank or go to the nearest Coinstar, whereas when you have the money in savings, it can be easier to reach.”
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No spend challenge
In the no-spend challenge, which has raked in 91.9 million views on TikTok, you commit to solely spending on necessities like food and transport to and from work. This challenge is intended to promote more thoughtful purchasing and encourages cutting down on non-essential things. By cutting out things like takeaways or buying clothes, you can see how much money you would save by the end of the week.
Lucinda O’Brien said: “While the no-spend challenge may seem extreme to some, you can decide how long you'll participate for. Whether you decide to avoid unnecessary purchases for a few days, a week, or even a few months, doing so will certainly help your monthly income go further.
"For people who wish to kick start their savings and figure out where their bad spending habits lie, this saving challenge can be helpful .”
50/30/20
The 50-30-20 rule is a simple technique for allocating money and making good financial decisions. Spending should be divided into three categories: necessities, wants, and savings. 50 percent of the budget is set aside for necessities, 30 percent for wants, and 20 percent is set aside for savings.
Lucinda O’Brien said: “The 50/30/20 challenge is a useful method for dividing monthly income accordingly. It is best to put this 20% away as soon as you receive your monthly paycheck, as you will then have less temptation to dip into it.
"A regular savings account would be a good option for this type of saving method, especially with the current high interest rates. For example, the Yorkshire Building Society Regular saver allows you to deposit up to £500 a month, and offers a 5% variable interest rate.
"However, only open regular savings accounts if you are confident that you can stick to similar-sized monthly payments.”
52 week challenge
The 52-week challenge is a relatively straightforward way of saving money throughout the year. Create a financial goal first, one for each week of the year. You can either start low and work your way up to a fixed sum, such as £10 per week and so on.
Once you’ve set your goal, you can start to save each week and watch your savings build up until the end of the year.
Lucinda O’Brien said: “The 52-week challenge is helpful for people who are reluctant to commit to saving a certain amount each month because the method is fully customisable. The challenge can be altered to suit your needs and financial goals.
"Depending on your circumstances that particular week, you might opt to increase the amount by £5 one week and then by £10 the following, it’s entirely up to you. For the best investment, put your money in a savings account that offers high interest rates and keep it separate from your current account.”
The Savings Ladder
The savings ladder challenge has over 3.6m views on TikTok and works by choosing a reward for yourself rather than setting aside a certain amount of money each month. Depending on how much you want to save, you double the price of your prize by two, three, or four after choosing it.
The example given is when purchasing Apple Airpods (£119), multiply that amount by three, and it leaves you with £357. This way, you’re able to purchase the Airpods and have £238 saved.
Lucinda O’Brien said: “This is an efficient method of rewarding yourself each time you hit your goal without using up savings. The savings ladder can certainly help you to continue to build up your savings and want to treat yourself occasionally without having to sacrifice your savings.”
60/10/10/10/10
This money-saving challenge involves spending 60% of your gross monthly income on essentials like rent or mortgage, food, utilities, and transportation, 10% on retirement savings, 10% on long-term savings or debt reduction, 10% on short-term savings (for things like car maintenance or repairs), and 10% on fun.
Lucinda O'Brien said: “The 60/10/10/10/10 method is useful for categorising your monthly income and deciding where you want the money to go, similarly to the 50/30/20 challenge. Nevertheless, the challenge may not be as doable for some as some of the other challenges on the list.
"It's beneficial to have a category for fun because this is money that most people don't account for during the month. However, if you have high-interest debt, you should think about whether you should be putting more than 10% of your income towards paying it off, if at all possible.
"It makes sense to pay off as much high-interest debt as you can before contributing to your retirement.”
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