By this time next year, you could have an extra $1,300 in savings. And all you need is $1 to start. Meet the 52-week money challenge—a simple plan that could help you turn relatively small weekly savings throughout the year into a tidy sum.
What is the 52-week money challenge?
The 52-week money challenge could help you build a savings habit by putting away an amount of money that corresponds to the week you save it.
So, start with $1 in week 1. In week 2, save $2. In week 3, save $3. In the last week, save $52—you’ll have stashed away a total of $1,378.
How to do the 52-week money challenge
To do the 52-week money challenge most effectively, you’ll want to pick an account to park your savings in. You could opt for a normal checking or savings account. Or you can consider the following options that may offer higher yields.
A high-yield savings account. Think of this as the savings account you already know and love—with an extra kick. As the name implies, the interest rates you’ll find on high-yield savings accounts typically far exceed the national average, which can help your savings grow. High-yield savings accounts are backed by the same FDIC insurance as normal savings and checking accounts.
A cash management account. Cash management accounts are a special type of brokerage account that functions kind of like a hybrid checking and savings account. You can easily withdraw money and pay bills, and you may get a higher-than-average interest rate. They also allow you to buy securities including certificates of deposit (CDs) —investments that generally pay a set rate of interest over a fixed time period. Similar to a high-yield savings account, CDs are backed by FDIC insurance.
An investment account. Whether you opt for a regular taxable brokerage account or a tax-advantaged retirement account like an individual retirement account (IRA) , investing your money, while risk of loss is involved, could give it a chance to grow over time. You may associate these types of accounts with investments such as stocks, bonds, and mutual funds, but they can also hold lower-risk investments called money market funds , which may offer higher interest rates than normal savings accounts and an alternative place to keep an emergency fund. Money market funds hold your money in relatively low-risk, short-term investments, and they’re liquid, meaning you can easily buy and sell them whenever you need access to cash. You could lose money by investing in a money market fund. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Before investing, always read a money market fund’s prospectus for policies specific to that fund.
Advantages of the 52-week money challenge
It establishes a savings habit Whether you’re a long-term saver looking to spice things up or you’re just getting started with your savings journey, trying (and sticking with) the 52-week money challenge can help cement a savings habit. After a year of regularly saving money, you may find yourself more motivated to continue saving going forward.
Keep in mind that ideally the 52-week challenge isn’t your entire savings strategy, but a complement to it. You’ll still want to work toward saving Fidelity’s suggestion of at least 15% of your pre-tax income for retirement including any company match and 5% of your post-tax income for short-term savings.