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What Is the Envelope Challenge, and Should You Try It?

This savings challenge isn’t right for everyone, but it could help you sock away thousands of dollars in just a few months, particularly if you take on the 100 or 200 envelope challenge.

Written by Ben Luthi / July 28, 2022

Quick Bites

  • The envelope challenge can help you kickstart your savings.
  • You can adjust the challenge based on your income and ability to save.
  • Carefully consider whether it's right for you and some alternatives that might be a better fit.

Saving money can be incredibly challenging, especially if you're not using a budget to plan and track your spending. The envelope savings challenge is one way to kickstart your savings in a way that could help you potentially save thousands of dollars in just a few months.

Depending on your situation, though, you can adjust the challenge to work for you. Here's what to know about the envelope challenge and whether it's right for you.

Inside this article

  1. What is the envelope challenge?
  2. How much can you save?
  3. Pros and cons of the challenge
  4. Who should try the challenge?
  5. Alternatives to the challenge

What is the envelope challenge?

The envelope challenge is a savings challenge that has become popular across various social media platforms.[1] It's also sometimes called the 50 envelope challenge, 100 envelope challenge or 200 envelope challenge.

Basically, it's a daily challenge that spans 50, 100 or 200 days—or another timespan of your choosing. Each day, you randomly select a numbered envelope and deposit that amount of cash into the envelope. (So $37 dollars would go into envelope 37.) Once you deposit cash into every numbered envelope, the challenge is complete. Then you can deposit the cash into an account that will accrue interest or use it for another goal.

"Challenges like these are popular because they offer a concrete and visual way to track progress," says Claudia Vallardes, a financial advisor at Kovar Wealth Management in Texas.

Here's how the challenge works:[2]

  1. Determine how many envelopes to use based on your income and ability to save.

  2. Number each envelope in sequential order, starting with one and ending at the total number of envelopes you're using.

  3. Mix up the envelopes and choose one at random every day.

  4. For each envelope you choose, place enough cash in the envelope to match the number you wrote on the outside.

  5. Seal the envelopes after you've placed the money inside and keep them safe until you complete the challenge.

  6. Deposit the cash into a savings account to avoid keeping that much cash in one place.

For example, let's say you pull out envelope number 25 on the first day and envelope number 9 on the second day. You'll put $25 in the first envelope and $9 in the second. You'll keep doing this until you've chosen all of the envelopes.

If you don't want to buy envelopes, you can also do it digitally by using a random number generator (like Random.org) or downloading a tracker (like this one from Swift Salary) that you can print out.

How much can you save with the envelope challenge?

Your total savings depend on how many days you want to do the challenge. Here's how the figures work out for a few different options:

Number of envelopesTotal savings
25$325
50$1,275
100$5,050
200$20,100

If you use a different number of envelopes, you'll use the following formula to calculate your total savings:[3]

(last envelope number / 2) x (first envelope number + last envelope number).

For example, if you want to use 15 envelopes, your formula will look like this:

(15/2) x (15+1) = $120.

Reset

It's important to keep in mind that the envelope savings challenge is not to be confused with financial expert Dave Ramsey’s envelope system, which is a cash-only budgeting system some people may use to stick to a strict spending plan or to get out of debt.

Pros and cons of the envelope challenge

Yes, you could just automate saving a certain amount of money each month from your paycheck. The envelope challenge is simply another way to accomplish the same feat, albeit in a more fun way. Also, since the cash and envelopes are more tangible than paycheck deductions, the envelope challenge might also keep you motivated to hit your most meaningful goals.

While it's easy to get excited about this unique approach to saving money, it's important to consider both the benefits and drawbacks of the envelope challenge before you get started. Here's what to think about.

Pros

  • Can help you save a lot of money in a short period
  • The plan is simple to follow, and the cash is easy to access
  • Envelopes are inexpensive, if you use them at all

Cons

  • Longer plans, such as the 100 or 200 envelope challenge, require a higher income
  • It doesn't help you learn how to adjust your spending
  • It requires a lot of motivation to complete the challenge

Should you try the envelope challenge?

The envelope challenge isn't for everyone, and even if you think it's right for you, it's important to know your situation, so you use the correct number of envelopes.

"The envelope savings challenge is best for people who are good at sticking to goals and not overspending," says Vallardes, who also blogs at Wise Dollar Mom.

Here are some other situations where it might be right for you:

  • You're on a budget and know exactly how much you can afford to save during the course of the challenge

  • Committing to the envelope challenge won't stop you from covering your necessary expenses and debt obligations

  • You have an important savings goal that requires laser focus

  • You're motivated to stick to your plan

  • You struggle with saving money in general

And here are some situations where the envelope challenge might not make sense:

  • You're not on a budget and don't know how much you can afford to save

  • The challenge would strain your budget in a way that keeps you from paying your necessary bills

  • You have a hard time sticking to financial plans and may benefit from a less intense savings plan

  • You have other important financial goals and don't want to focus only on savings

  • You don't have problems with saving your money regularly

What if the envelope savings challenge isn't right for you?

If you've decided that the envelope challenge isn't the right fit for you, there are other ways to save money that don't require intense focus over a short period of time.

"If you have trouble saving money, start with small amounts," says Vallardes. "Put $5 or $10 into your envelope each week. Once you get used to the system, you can increase the amount you save."

Here are some other creative ways you can save money consistently:

  • Get on a budget and categorize your expenses, so you know where you can cut back on your spending

  • Include your monthly savings goal in your budget instead of waiting until the end of the month and saving the leftover cash

  • Give yourself a cooling-off period on large purchases to determine if you should really spend that money

  • Deposit all windfalls, such as tax refunds, work bonuses and cash gifts, to your savings account

  • Try a no-spend week or month, during which you avoid all discretionary spending

  • Audit your monthly subscriptions and cancel the ones you don't use often enough

Regardless of how you choose to save your money, the important thing is that you determine what works best for you and commit to it.

Article Sources
  1. "Savings Plan - Does the Envelope Challenge Work?" Tally, January 6, 2022, https://www.meettally.com/blog/envelope-challenge.
  2. Paulina Likos, "100 Envelope Challenge Explained," SoFi, June 7, 2022, https://www.sofi.com/learn/content/100-envelope-challenge/.
  3. “Finding the Sum of Consecutive Numbers,” Study.com, https://study.com/academy/lesson/finding-the-sum-of-consecutive-numbers.html.

About the Author

Ben Luthi

Ben Luthi

Ben has been writing about money since 2013. He's been on staff at NerdWallet as a credit card writer and for Student Loan Hero, where he covered student loans and other personal finance topics. Ben's work has appeared in U.S. News, The New York Times, Experian, FICO, Credit Karma, Bankrate and more

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