TikTok’s 100 envelope challenge works, sort of

TikTok’s 100 envelope challenge works, sort of

In the midst of a looming global recession and all-time high inflation levels in the US, TikTok’s latest savings hack, the “100 Envelope Challenge,” promises to help users save money. Save up to $5,000 by storing cash in labeled envelopes over the course of 100 days.

The benefit of the 100 Pack Challenge is that it starts small and encourages consistent, mindful saving that adds up quickly. But the trend — and the Internet’s obsession with buying “aesthetic” envelopes for them — may not be the most effective way to save money, according to financial experts.

How the 100 Pack Challenge works

The savings hack, with a hashtag that has garnered more than 150 million views on TikTok, asks users to label the envelopes from 1 to 100 with the intention of chronologically filling each envelope with the dollar amount of said envelope. In other words, on the 50th, you would take the 50 envelope and put $50 in it. At the end of the 100 days, if you can afford ityou will have saved $5,050.

Since it started in July 2021, Jasmine Taylor, founder of Baddies & Budgets, has completed it three times and saved over $15,000. With that money, she has been able to pay off her student loans, max out her Roth IRA retirement account for this year, and start a down payment on her first house. The most popular video on her YouTube channel, with nearly 400,000 views, shows how she unwrapped hundreds of bills and completed the 100-Bag Challenge. “This is doable!” she tells viewers about her in the video.

Taylor recommends those with smaller budgets who can’t save for 100 days in a row (or afford to save more than $2,500 in the last month of the challenge) put cash into two envelopes per week. For those who can’t put the exact amount the envelope calls for, he recommends whatever amount you can. Another popular method is to choose the pack numbers at random, rather than chronologically.

“The challenge can seem daunting at first, but once you get started, you start to see the money add up and see that it’s a fun, less monotonous and effective way to save your money,” Taylor tells TIME. The biggest piece of advice from him: start as soon as you can. “Get the first couple of bucks in there, and before you know it, you’ll be down 100 envelopes.”

the cost of saving

But this method of saving money probably isn’t what will bring the most value to your savings, according to Patrick Di Cesare, a certified financial literacy instructor. “It’s a creative way to save money, but having cash put away is like burying it in the garden or under the mattress. Potentially, it is losing its value at a rate of 6.5% per year.”

Instead, Di Cesare advises that once you’ve built an emergency savings fund and paid off your high-interest or personal loan debt, you should prioritize saving in a high-yield savings account or investing it. Some savings accounts can earn up to 4% interest per year and will help your cash grow over time. The sooner people put their money into savings accounts and withdraw it out of cash, the more it will grow, he says.

Jen Hemphill, a certified financial adviser and host of the Her Money Matters Podcast, understands the drawbacks, but believes the psychological component of the challenge could outweigh concerns about inflation and loss of interest for some people. “Saving challenges like this gives people responsibility and this one is fun, visual and provides a game feel,” she says. Hemphill recommends making the challenge your own and depositing cash into a high-yield savings account as you go, she says.

Baddies & Budgets influencer Taylor says the responsibility “trick” of saving every day can particularly help those who have had trouble saving in the past. “The cash envelope method is not necessarily for wealth management or for those who already have their finances together. It is for people who seek to control their finances and their relationship with money.

Emulating the “aesthetic” version of the internet challenge can also cost you more than just a pack of manila envelopes. Taylor recommends using a fireproof safe to store his cash.

To further motivate herself to complete the challenge, Taylor decided to make her own set of clear PVC plastic envelopes that allowed her to clearly see each dollar bill she was saving. They are now available for purchase on his website and have become so popular that he is having a hard time keeping up with the orders. But they’re also $49.90, plus shipping.

“When things are aesthetic and pretty, dealing with budgeting your finances is a little easier to do,” she says. “But I understand that being able to buy things from small businesses can be a luxury, so in any case you have to do what you can with what you have.”

Motivation to save

Ashley Johnson, an Ohio-based systems data analyst, made her own set of glitter envelopes and has decided that every Wednesday she will take an envelope and insert the dollar amount that corresponds with its label, starting with envelope 100 and working down. even about one She has so far filled three envelopes, saving almost $300 so far this year.

Her hope is that this savings hack will help her reach her financial goals of owning a home and potentially starting a homeless shelter. “It’s convenient and I don’t have to think about it,” she says. “I know that in the end I will have $5,050 guaranteed.”

Financial adviser Hemphill emphasizes that whether you’re participating in the 100-pack challenge or not, you need to commit to your finances and your budget: “It might scare people, but it’s so important to stay in tune with your finances. Take small steps and start where you are now.

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write to Mariah Espada at mariah.espada@time.com.

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