Want to save money but don’t know where to start? Then it is wise to start small!
The basic idea of the Penny Challenge is that even saving a tiny amount can add up over time – even just a penny that you might not look twice at when you see it on the floor.
Let’s discuss how the Penny Challenge works, a few different ways you can handle the logistics, and how much you can save by adding a penny a day for a year or more.
What is the Penny Challenge?
If you’re used to running out of money at the end of the month, the 365 Day Penny Challenge is a perfect way to get into the habit of saving, and do it in a simple way you’ll hardly notice.
On day 1 of the challenge you only have to save one cent. Then increase that amount by one cent per day for a year (or however long you wish to continue doing so).
This is what the challenge looks like in practice:
Day 1: Save $0.01Day 2: Save $0.02Day 3: Save $0.03Day 50: Save $0.50Day 100: Save $1.00Day 200: Save $2.00Day 365: Save $3.65
I’ll save you the scrolling to include the entire 365 day list – you get the point! The gist of this is that the 365 Day Challenge isn’t just about saving a dime every day; It’s all about slowly increasing how much you save over time. You’ll end up saving over $3 a day, which will help make your final saving much higher (we’ll look at the exact Penny Challenge winning numbers in the next section).
If you’re using cash, you can use physical coins and dollars in this money-saving challenge. Many people enjoy the feeling of watching their progress when they fill a special savings jar.
However, if you’re like me and don’t use cash, you can easily accomplish the same thing with a bank account.
If you want to specifically track how much you’re saving for the penny challenge, rather than mixing it up with other savings goals or your emergency fund, I’d recommend opening a free online savings account specifically for the penny-a-day challenge. This way you can also earn interest on your savings – pennies free for your Penny Challenge!
Check out some of my favorite savings accounts here. You can either transfer the amount from your main checking account every day or (for less frequent work) add up the Penny Challenge per week and transfer once a week.
For example, the first week goes from 1 cent to 7 cents a day. With a simple online sum calculator, we can just plug in 1, 2, 3, 4, 5, 6, and 7 to see that the weekly total is 28 cents. Next week we’ll start at 8 and go through 14, for a total of 77 cents.
Once you start getting into dollar territory, just add a decimal before the last two digits (so week three, 15-21 cents a day, adds up to $1.26).
Adding the daily numbers and making a weekly transfer for the Penny Challenge can save you more time than logging in every day to transfer pennies into your savings account.
How much you would have if you saved a penny every day for a year
Can you really save money with the Penny Challenge? Absolutely! The grand total for a 365-day penny challenge is a whopping $667.95.
In comparison, 56% of Americans would struggle to cover a $1,000 emergency expense. If you do the penny challenge, you can have almost that amount and more in your back pocket on a rainy day.
The savings amounts from the Penny Challenge really start to make themselves felt as you approach the end of the year when you’ve reached the level where you can save several dollars a day. (If you saved literally a penny a day for a year, you would end up with $3.65.)
Is the Penny Challenge a Good Way to Save Money?
First of all, every saving is a good saving! If the penny challenge fits your personality well, that matters. It offers a fun, gamified experience that can help you form a habit and turn savings into a positive thing for you. It can also be a great challenge for kids to get excited about saving money too.
That said, I wouldn’t let the Penny Challenge limit me. The downside to these low daily savings goals is that you could get into the mentality, “Well, it’s day 100 and I just need to save $1 so I can spend all that other money I made today!” whenever you are able to save extra money, it is advisable to do so.
So think of the Penny Challenge as a starting point and a way to stay on track, rather than a ceiling for saving. Heck, if you want to start your penny challenge at $1 a day, be a rebel and do it! As long as the lights are on, the bills are paid and the household is fed, you can’t save too much. (Check out this information on how you can drastically reduce your expenses.)
What to do after the Penny Challenge?
Once you complete the 365 day penny challenge you will be used to saving money and there are so many great ways you can continue those habits and save even more!
If you liked the playful feel of the Penny Challenge, you can see how long you can keep it up – e.g. B. on day 366 you save $3.66 and so on. There may come a point when you can’t increase the amount anymore, so you can either choose a lump sum (e.g. $5 a day every day) or use it as motivation to try some side hustle ideas to make the snowball keep savings flowing.
When you feel confident about the amount in your savings account, you can start learning how to invest to make your money money. Investing $5 a day makes over $1800 a year plus any profits you make in the stock market. Just make sure you fund a 6 month emergency fund before you start investing as the stock market can also go down and you don’t want to be in a tight spot when you need cash and the market is low.
Finally, the Penny Challenge is a great place to start for anyone looking to get their bank accounts in shape for the New Year! And once you’ve seen how that adds up, you’ll probably never walk past that penny on the sidewalk again.
Have you ever tried the Penny Challenge or something similar? Comment below and let me know how your experience was!
Kate is a writer and editor who runs her content and editing businesses remotely while traveling the world as a digital nomad. So far, her laptop has taken her to New Zealand, Asia and across the US (mainly thanks to credit card points). Years of research and ghostwriting on personal finance led her to the FI community and co-founder of DollarSanity. In addition to travel and outdoor adventures, Kate is passionate about finance, compound interest and impeccable grammar.