The $5 Challenge Is a Low-Effort Way to Build Your Savings

A woman gets her finances together while sitting on her couch.
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Here at The Penny Hoarder, we kind of have a thing for Abe Lincoln.

His face is on our favorite coin after all.

But as much as we love our pennies, we also like seeing Lincoln’s bearded mug on the front of the $5 bill. And saving $5 bills is much more lucrative than hoarding pennies.

How to Save Money With the 5 Dollar Challenge

The five dollar challenge is a simple way of saving money— one that doesn’t involve much thought or effort. You don’t have to do any math. You don’t have to cut back on spending. You don’t have to put aside an obscene amount of money each month.

All this challenge requires is for you to stash away every $5 bill you get as change. That’s it.

If you’re paying for something and the cashier hands you back a bill with Lincoln’s solemn face, don’t use it to buy coffee or a cheap lunch from the drive thru. Commit that $5 bill to your savings account.

Depending on how long you participate in the savings challenge, you could end up banking a lot of cash. Five dollar bills can add up quickly. Just putting aside two $5 bills a week will give you $520 in savings after a year. And since the amount is fairly nominal, your savings can grow without even missing your $5 bills.

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Where to Keep Your Money

Separating all your $5 bills from the rest of your spending money is key to succeeding in this challenge. Many folks who participate in the $5 challenge stash their cash in jars, envelopes or even shoe boxes. Think of it as your adult piggy bank!

You can keep a running count of your balance or just wait until the end of your challenge to be surprised by the total.

If you don’t feel like keeping all that extra money at home though, make weekly deposits into a savings account. Your savings will be insured, you’ll distance yourself from your stash and you can even earn interest — especially if you have a high-yield savings account.

Participating in the Challenge When You Don’t Use Cash

If you’re used to swiping your debit card everywhere you go, that doesn’t mean the five dollar challenge isn’t for you. You’ll just have to do a little extra work.

When you make a purchase, think about what change you would have received if you paid in cash. For example, if your Target run totals to $84.25 and you would have paid with a $100 bill, you’d likely get a $5 bill, a $10 bill and 75 cents back as change. Before you pull out of the parking lot, log onto your online banking account to transfer $5 to your savings.

To make it simpler, you could resolve to transfer $5 to your savings account every time you swipe your card. Or you could be more selective and only add $5 to your account when you make a specific purchase, like filling up your gas tank.

Another option is to, well, make the switch to using cash — but do it just for your fun money expenditures. Stick with swiping your card to get groceries or stock up on toiletries, but pay with cash when you go shoe shopping or out to eat. Any $5 bill you receive in change goes — you guessed it — straight to your savings.

The cash envelope system is a good budgeting method for those who use physical cash. If you don’t, here’s how to hack the cash envelope system to make it work for you.

Customizing the Five Dollar Challenge

If squirreling away $5 bills doesn’t work for you, you can modify your money-saving endeavor while still sticking to the basic premise of the challenge.

Save all the coins you get as change. (Piggy banks aren’t just for kids, you know.) Or you could put aside all the $1 bills you receive.

Going with a smaller denomination of money doesn’t automatically mean you’ll be saving less. For example, if you frequently receive more $1 bills as change than $5 bills, you could end up saving more.

Have a Goal for Your Savings

Whether you plan to stick with this savings challenge for a couple months or the whole year, it’s good to have a plan for what you’ll do with the money you save.

You could afford something nice for yourself, like taking a much-needed vacation or buying something on your personal wish list. Or you could use the money for something that reflects your financial goals, like making a nice dent in your student loan or credit card balance.

However you decide to use your savings, having an end-goal in mind can keep you motivated to stay consistent — and to not dig into your stockpile before the challenge ends.

Nicole Dow is a former senior writer at The Penny Hoarder. Senior writer Robert Bruce updated this post for 2023.