Rainy Day Fund Savings Challenge

Saving money is so hard when you’re on a tight budget, but it’s not impossible. That’s why savings challenges create an easier and more fun way to build a rainy day or vacation fund. Or in my case, an Oh You Fancy Fund.

There are many different types of savings challenges. The 52-Week Challenge is a very popular one. But unlike an emergency fund, where you save 6-8 months of your expenses just in case you lose your only source of income, a Rainy-Day-Fund is a lump sum of money that you stash away just in case something goes wrong. Car repairs, boiler fails, broken tooth… don’t I know about that one. 

The broken tooth scenario is the reason I knew I had to find a way to save money for emergencies. A way that would work for me on a personal level. I accept the fact that I have to hide money from myself because, technically, a Chanel bag is not an emergency. 

The amount you save also has to be a realistic amount that won’t leave you scrambling to buy groceries.

While searching on Pinterest for financial tips, I found the perfect challenge.

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52-Week Challenge

A few years ago, I tried the 52-Week Challenge with a friend at work. 

We looked through so many rainy day fund and savings challenges that were way out of our league. Some of these 52-week challenges had $200-$300 deposits. Really?

If you have an extra $200-$300 a week in your budget, that isn’t already spoken for, you will find it a whole lot easier to save money. But, since that’s not me, we ended up choosing the traditional 52-week challenge.

Because most people get paid on Fridays, we chose that day to make our savings transfers. 

The way it works is the first week of the year, you put $1.00 into a savings account–preferably a high-yield savings account. I use Marcus by Goldman Sachs. The 2nd week, you would deposit $2.00 into that savings account, and so on, and so forth until you get to the 52nd and final week of the year. For that week, you would deposit $52.00.

At that point, you will have $1,378.00. Saving it in an interest-bearing/high-yield savings account will leave you with more than you put in. You will also have earned compounded interest on your savings adventure. That would make you not just a rainy-day fund saver, but also a smart investor. 

Another way to do it is to decide on a set amount, then set up automatic transfers so that you don’t forget. You won’t have to think too hard about whether you want to do the transfer or not. I know it happens because I’ve experienced it. That’s why I set up auto transfers to take the designated amount out the day after each payday.

If you get paid on the 1st and the 15th, activate the transfers on the 16th and the 2nd. But it’s entirely up to you. Whatever you are comfortable with.

I have used both Capital One 360 Performance Savings™ and Marcus by Goldman Sachs for my yearly savings challenges. If you use my links, we both may receive bonuses. At the end of my challenge on both platforms, I had a balance that was higher than what I had deposited.

If you’ve heard of ‘Passive Income’ but weren’t sure what it was, well this is it. And this is just one of the many ways to earn passive income. 

Earning Passive Income

Passive income is money that you earn from a process you put in place that you no longer have to work hard to turn a profit from.

You put the work in once, and you continuously generate money from your initial input. If you put money into a savings account, you don’t have to do anything else. It will earn money for you while you sleep.

Imagine that on January 1st, you deposited $1,000.00 into a savings or investment account. This is called your seed money because it is the seed from which your wealth will grow.

Then you left the account to its own devices without making even one additional deposit.

On December 31st of that same year, when you looked at the account balance, you found that it had grown to more than $1,100.00.

You’ve gained $100 for doing nothing. That’s with a 10% return. Imagine if you were able to get a higher return than that in a year. And if you added just $10 extra per month, you would have $1,220.00. Test it out using the compound interest calculator on the resources page. This is what happens when you intentionally put your money in an account that offers the potential for growth. The additional amount is passive income.

It’s passive because, no matter how much more it is, you didn’t have to lift a finger to earn that additional money. All you had to do was put a plan in place that would create the potential for that passive income. 

This is how the 1% build their wealth. It’s what millionaires and billionaires do every day. That’s why I’m sharing this tip so that everyone can get in on that game. 

The higher the rate of return, the more passive income you can earn. Keep in mind that it also depends on the type of account you choose and your tolerance for risk. 

While the stock market offers the opportunity for amazing returns, it’s just like being at the casino, even if you know what you’re doing, sometimes the ball lands on green. Unfortunately in roulette, green is not good. It kinda cancels itself out I guess. 

Green + Green = $0

So if you choose a vehicle for your seed money that has the potential for great returns, but also has a small or substantial risk factor, know that you have to decide how much you are willing to risk before you jump in and take it for a spin. 

If you have a low-risk tolerance, then it’s best to go with a high-yield savings account or CD (Certificate of Deposit) until you become comfortable with investing. 

As long as you leave at least some of your seed money active in the account, it can have the chance to grow.

Creating New Challenges

Because my job pays me on the 15th and the last day of the month, I found the traditional 52-week challenge was a true challenge for me.

Every Friday after the first 6 months, I had to contemplate whether or not I could transfer the specified amount on that Friday. Sometimes I waited until my payday and just made up the difference. But that threw me off the routine, so this year I made up my own savings challenges geared towards bi-monthly paychecks.

I think the reverse 52-week challenge could be easier for people who get paid weekly. You get the hard part out of the way first. Then at the end of the year, you might even be able to add more to the balance.

I ended up creating bi-monthly savings plan charts that work better for me. You can sign up and download them >>here<<.

This made the challenge a lot easier to accomplish without overthinking it. I’m excited to test out the $44 or $63 challenge next year.

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Starting your journey into wealth building with a Rainy-Day Fund challenge is a great way to get your feet wet in the passive income pool. LOL! 

Which challenge are you up for?

Disclaimer: This is not investment advice, it’s just a suggestion.
Play at your own risk.