A low-effort way to grow your savings

If you’re looking for a creative way to bulk up your holiday budget or jump-start an emergency fund, the $5 bill challenge could turn out to be your new favorite money hack.

The premise is simple: Every time you receive a $5 bill, you stash it away. What starts as loose change can turn into hundreds of dollars with almost no effort.

Want to give the $5 bill challenge a try? Here’s what you need to know.

If you’re new to saving money, participating in the $5 challenge can be a low-effort way to get the ball rolling.

Here’s how it works: Every time you receive a $5 bill, you set it aside instead of spending it, whether it’s from cash back at the store, change from a purchase, or in a birthday card.

Some people commit to the challenge for a month, a year, or until they reach a specific savings goal. There aren’t really any rules regarding how long or how much you should save. The point is to make saving money fun and manageable.

“The $5 challenge is basically a savings habit disguised as a game,” said Bree Shellito, director of financial well-being for Ent Credit Union. “It works because it removes the decision making. You don’t have to wonder, ‘Should I save this?’ You just do it.”

Of course, no savings challenge is one-size-fits-all. There are several key pros and cons to consider before undertaking this kind of challenge.

Pros:

Low effort: The $5 savings challenge is straightforward — you don’t need apps, spreadsheets, or complex rules. Its simplicity makes it approachable even for people who struggle with traditional budgeting and saving.

Nonrestrictive: Because it works in small increments, the challenge helps people save money without making major lifestyle changes. And this small-but-consistent approach to saving can add up faster than you might expect. “For someone handling cash daily, you can build a few hundred dollars surprisingly fast, sometimes $500 or more in a year without feeling the pinch,” Shellito said.

Great for cash carriers: The $5 bill challenge is ideal for individuals who use cash as their primary payment method, as they’ll likely accumulate savings faster than those who prefer spending with debit or credit cards.

Read more: 5 common mistakes people make when “cash stuffing”

Cons:

Savings can be inconsistent: Some weeks, you may save several $5 bills. Other weeks, you may save none at all. The unpredictable pace makes it difficult to rely on this challenge for time-sensitive goals.

Cash doesn’t earn interest: Money sitting at home loses value over time due to inflation. However, you can supercharge your savings by depositing your cash in a high-yield savings account that earns competitive interest. Plus, you won’t have to worry about your cash getting lost or stolen.

Many people are cashless today: This challenge may not be effective if you don’t typically use cash, which is increasingly common given the many digital payment methods available today. According to a Capital One survey, 47.8% of respondents make no cash purchases in a typical week, and 69% used cash for a few (if any) purchases over the last 12 months.

Read more: 6 times you may be charged extra for paying in cash

If you’re not a cash carrier, it doesn’t mean you can’t take on the $5 bill challenge. You may simply have to make some adjustments.

“If you try to adapt the challenge without cash, it becomes less of a $5 challenge and more of a round-up challenge,” Shellito said. “That means saving the change you would have received or rounding your purchase to the next $5, $10, or $20. It is still a solid strategy, but different from the $5 challenge.”

If that sounds like a lot of work, many banks will do the heavy lifting for you. Ally Bank, for example, offers savings tools that allow you to round up purchases to the nearest dollar and automatically deposit the difference into your savings account. Bank of America offers a similar savings program called “Keep the Change.”

The main thing to keep in mind when it comes to this gamified savings strategy is that while it can make saving fun and feel less stressful, it may also make it more difficult to reach your goals within your desired timeframe. However, this doesn’t mean it can’t work effectively when paired with a more structured savings plan.

Read more: 6 Gen Z savings strategies that can work for anyone