Serious about making an attempt the 100 envelope problem on TikTok? You are not alone. Cash is one thing we’re all worrying about increasingly more. In any case, it is no secret that because the value of dwelling continues to rise, the common wage is not precisely maintaining. In 2023, 31% of Gen Zs claimed to be anxious about their monetary state of affairs. A 2024 research discovered that just about half of younger individuals have “cash dysmorphia”, an anxiousness about funds that occurs even when the person is comparatively financially secure.
On this local weather, it is hardly a shock that younger individuals are looking for hacks to avoid wasting just a little further every month — on TikTok, as an example, a brand new saving problem is choosing up steam. The 100 envelope problem sees individuals stowing away further money day by day in a devoted folder. The problem has had 6 million views right here within the UK within the final month.
Nonetheless, whereas the problem might initially appear to be a constructive money-saving hack, some monetary specialists have issues that it would truly be making our monetary anxieties even worse, whereas concurrently being an ineffective saving technique.
“It makes whole sense that Gen Z would search recommendation on saving,” says Alice Leetham, Finance Skilled at Moneyzine. “On this financial system, many are feeling the squeeze, not least people who find themselves simply beginning their careers and certain have a modest quantity of disposable earnings.”
Nonetheless, she warns that “gamifying saving” might have some downsides. Let’s discover why.
What’s the 100 Envelope Problem?
The 100-envelope problem includes buying or making particular money-saving binders with 100 envelopes. Every envelope has a goal quantity starting from £1 to £100. The concept is that by filling up the binder over the course of the yr, you will finally save £5,050.
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Is the 100 Envelope Problem too good to be true?
In response to Leetham, the problem might have too many downsides to be price making an attempt. For one factor, though breaking down financial savings into 100 elements might really feel achievable, in actuality, saving £5,050 a yr could also be inconceivable.
“The 100 envelope financial savings problem is one thing that sounds completely cheap on the face of it, however while you have a look at how a lot cash you’ll be anticipated to avoid wasting every month you realise it’s in the end futile until you’ve received a lot of disposable earnings,” she says. “Contemplating the common internet month-to-month earnings within the UK is £2,297 in response to ONS, I think you’d wrestle to maintain up with this problem.”
In some circumstances, being unable to maintain up with the problem would possibly even have an hostile impact in your mindset.
“These challenges really feel akin to fad weight-reduction plan,” she says. “One thing that may, at greatest, depart somebody dissatisfied with the outcomes, however at worst, can depart individuals feeling disaffected and never wanting to interact anymore.”
There’s one other draw back, too — saving bodily cash in a folder might really feel nice, but it surely’s not truly a good saving technique. In any case, you will not accrue any curiosity in case your cash is solely sitting in a binder in your desk. “Should you have been to avoid wasting that cash in a web based financial savings account, you’d additionally profit from the extra curiosity in addition to your financial savings,” she suggests.
Is there a wiser option to do the 100 Envelope Problem?
Leetham recommends making an attempt an analogous technique with a web based financial institution, akin to Monzo’s 1p Financial savings Problem, which is rather more achievable. “On January 1st you’d save 1p and on December thirty first you’d save £3.66,” she explains, including, “Even when you’re late to the occasion and need to be a part of on this yr, it could solely value you round £40 to catch up.”
Plus, this sort of problem means you’d profit from curiosity.
“I’d wholly advocate this problem as a option to dip your toes into saving,” she says.