money saving challenge envelope

Elevate Your Savings with Money Saving Challenge Envelopes

  • Post author:Bob Haegele
  • Post last modified:February 11, 2024

Saving money is extremely important for a whole host of different reasons. The main one is it unlocks financial security — and financial freedom. But if you’re having trouble saving, you can try a money-saving challenge envelope.

The money-saving challenge envelope is a powerful tool for saving money, as it forces you to save even when you don’t want to. This can make it easier to regain control of your finances and put yourself on a better financial path.

Here, we’ll discuss what this money-saving challenge is all about, how it can help, and how to make it work for you.

What Are Money Saving Challenge Envelopes?

Money-saving challenge envelopes are a tool you can use to help you complete a money-saving challenge. These can either be physical envelopes or they can be part of financial management software or apps.

Here’s how they typically work:

  • Budget categories: You pick several budget categories where you typically spend your money, such as rent, groceries, utilities, etc. Then you write the name of the category on one envelope.
  • Determine your budget: Before you get started with your money-saving challenge envelopes, you’ll need to know how much money you have available for the month by creating a budget.
  • Add money to each envelope: Once you know how much money you have available, divide it up between each envelope, ensuring each has enough money based on your budget.
  • Limit spending to what is in the envelope: The key to this challenge is to only spend what is in each envelope on the matching category. If you need to spend more, you must “borrow” from other envelopes, meaning you have less to spend on the other category.
  • Saving envelope: Some people include a saving envelope, where they add a certain amount of money every month. Of course, since this is a savings envelope, you wouldn’t spend the money that goes in.
  • Adjust as needed: You may find you regularly have too much in one envelope and too little in another. If this happens, you may need to make adjustments.

This method can be beneficial if you are a visual person or you have a lot of trouble saving enough each month. Having something real and tangible can make it easier to visualize success.

Preparing Your Envelope System

Now it’s time to set up your envelope system, and this can be the most involved part of starting a money-saving challenge envelope. However, it’s worth it, as setting it up correctly will help ensure success.

Start by analyzing your current financial situation. For this step, you will need to get into the weeds of your finances. Review your bank statements, credit card statements, and spending habits. This will help you see how much money you’re making and where you are spending it.

To help you better understand your spending habits, it may help to identify your major spending categories. Common categories include housing, groceries, utilities, healthcare, and entertainment. Don’t forget to include less frequent (but inevitable) categories like annual subscriptions.

One way to make it easier to identify your spending categories is with budgeting software or an app. These include Empower (formerly Personal Capital), Quicken Simplifi, and You Need a Budget (YNAB). Some allow you to link your bank accounts and credit cards, making it easier to categorize your spending.

Next, compare your income with your spending. Hopefully, your current expenses will be less than your income, as this will leave you with extra money to save.

If your income is less than your spending, you are likely living beyond your means and may have to make adjustments. This could include saving money or getting a job that pays cash daily.

Cutting Back

Another important part of setting up your money-saving challenge envelope is comparing needs with wants. You probably have some necessary expenses like a mortgage or rent, utilities, and groceries. On the other hand, you likely have discretionary spending on things like eating out, entertainment, and travel.

While you will almost certainly want to keep some of your discretionary spending, identifying these expenses will help you find areas where you can cut back.

You should also look for patterns in your spending. For instance, you might have certain recurring subscriptions or frequent spending on daily coffee, dining out, or other discretionary areas. This can help you find places where you can make small changes that might have a big impact.

Creative Money-Saving Challenge Envelope Ideas

This step is mostly about making your money-saving challenge envelope fun and interesting, which can make it easier to stay committed. The key is to really get creative.

For instance, you can use paper envelopes, digital plastic envelopes, or digital ones. Whatever works best for you is the best choice here.

You can also get creative with your budget categories. You probably have common categories like rent and groceries, but you can also have some fun categories like dog food/pet care or video games. Whatever you prefer — it’s entirely up to you.

In addition, you can give each money-saving challenge envelope a creative touch. For instance, you could add stickers or drawings or make each envelope a different color.

If you prefer digital envelopes, see if it has any customization features that let you get creative. Again, it’s all about making the challenge yours and making sure you are engaged in it.

Popular Money-Saving Challenges

There are many types of money-saving challenges you can pair with your money-saving challenge envelope. For instance, you can try a 52-week savings challenge, a six-month money-saving challenge, or a money-saving challenge for low income.

Each has its own benefits, and you can customize them based on your budget. Here’s how these challenges work:

  • 52-week savings challenge: With this challenge, you increase your savings every week. For instance, you can save $1 the first week, $2 the second week, $3 the second week, etc. This helps you build momentum, and you slowly start to see your actions have a positive impact.
  • Six-month money-saving challenge: Similar to the 52-week money-saving challenge, but it only takes half a year. However, you must save more each week to make up for it.
  • Money-saving challenge low-income: These challenges usually focus on methods that avoid spending, like a no-spend challenge or a no-eating out challenge. This one is ideal to pair with an envelope challenge since you’ll have more money to spend.

Remember to set goals that are realistic and attainable. This will help you stay motivated while ensuring your goals are not out of reach.

Protecting Your Savings

Completing a money-saving challenge is a venerable goal, but it won’t do much good if you end up spending the money you saved. This is why it’s important to protect your savings.

Perhaps the best way is to put your savings in a separate, high-yield savings account. This can reduce the temptation to spend the money in the account, in part because bank transfers usually take two to three business days. By the time you have the money from the savings, you may no longer be interested in the impulse buy you were considering.

The other benefit is that high-yield savings accounts usually pay much more than traditional savings accounts. This means your money will not only be set aside, but it will also grow over time.

Remember that it’s also important to maintain an emergency fund. If you have money left over from your money-saving challenge envelope, you can put it in your emergency fund. This will help ensure that when a rainy day rolls around, you aren’t forced to use costly borrowing, like personal loans or credit cards.

Tips for Staying Committed

As mentioned, keeping your money in a separate, high-yield savings account can help you protect your savings. However, you can also take things a step further and set up automatic transfers. It’s great to do this monthly or every time you get paid.

The reason I love automation is that it makes your savings out-of-sight, out-of-mind. You might even forget you have automatic transfers set up.

Conversely, if you have to move money into a savings account manually all the time, you may be tempted to spend it. Making it automatic means you won’t even have to think about it, and you’ll be more likely to stay committed.

Another way to stay committed is to regularly review your budget and see how you are doing with your money-saving challenge. If you see that things are working well for you, you’ll be more likely to keep making those gains.

Bottom Line

Money-saving challenge envelopes can be a great way to keep yourself on track when completing a money-saving challenge. They force you to only spend money as intended, so you won’t be tempted to spend on things you don’t need. You can pair these envelopes with any popular money-saving challenge, such as a 52-week or six-month savings challenge or a low-income savings challenge.

Be sure to continue tracking your progress and make adjustments as needed. I also recommend maintaining a separate high-yield savings account for your savings, which will reduce the temptation to spend the money you’ve saved.

Hey there. My name is Bob Haegele and I'm a personal finance writer who has been freelancing since 2018. Since then, I've built a six-figure career as a freelance writer. My work has been featured in Business Insider, Forbes Advisor,, USA Today, and many other outlets. Interested in starting a blog of your own? Check out my post on starting a blog.

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