Question of the Day: Which savings strategy is most effective: a) Saving $5/day b) Saving $35/week or c) Saving $150 per month?
Answer: Saving $5/day.
- Do you think that setting goals is important when it comes to saving money? Why or why not?
- Why do you think setting the $5/day goal was more effective than the others?
- Have you ever set a savings goal?
- If so, what was it and did you accomplish it?
- If not, what savings goal would you set?
Behind the numbers (from Business Insider):
Experts found that breaking down the goal into manageable pieces spurs confidence, even though the ultimate amount of money that would be saved is exactly the same.
Benartzi and his colleagues at UCLA asked a group of participants if they would like to save $5 every day, and another group if they wanted to save $35 a week, and the third group whether they thought they could save $150 a month. The results were astonishing: Nearly 30 percent of the participants said they could save $5 a day, while just 7 percent elected to save $150 a month.
Bloggers have popularized the $5 savings challenge as well, where people were encouraged to save every $5 bill they come across in their wallet instead of spending it. One woman claimed she saved $40,000 over 13 years just by socking away her $5 bills.
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About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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