If you’re having money problems, someone on TikTok has a solution.
Between “cash stuffing”, the “100 envelopes” method or the “no spending” challenge, there is no shortage of suggestions to improve your financial situation.
“Gamification can be pretty fun,” said Ted Rossman, senior industry analyst at Bankrate. But like any other quick fix, these can be difficult to maintain over time, he added.
How These Savings Challenges Work
The “100 Envelopes” method involves saving an extra dollar every day for 100 days. The first day you will put aside $1, then $2 the next day and so on, so at the end of the 100 day period you will have over $5,000 saved.
The approach has proven so popular that there are now more than 1,000 specially designed kits, trackers and binders dedicated to this money-saving trend for sale on Amazon.
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What you need to know before following TikTok’s advice
More and more young adults are also trying another envelope method, or “cash stuffing,” to stay within their budget and avoid going into debt.
The principle is simple: pocket money is divided into envelopes representing your monthly expenses, such as groceries and gasoline. When money in one envelope is spent, you are either finished spending in that category for that month or need to borrow from another envelope.
Alternatively, the “no spending” challenge advocates completely eliminating all non-essential purchases for a week, a month, or even a full year, and devoting money that would otherwise go to Starbucks coffees, dinners out, and new clothing towards a long-term investment. financial goal.
“Walk before you run”
“I would definitely emphasize walking before running,” Rossman said.
Rather than jumping into the latest extreme fad, which can be difficult to maintain, “it comes down to budgeting and setting expectations,” he said.
Budgeting can help balance immediate, short-term, and long-term needs, according to data from The Pew Charitable Trusts, and automatic savings can reduce the effort required to replenish savings.
Rossman advises regularly transferring money from your paycheck to a savings account. “You’re less likely to miss what you don’t see,” he said.
Establishing such a routine is necessary to build wealth, other experts also say.
There’s no secret to developing good financial habits, added Matt Schulz, chief credit analyst at LendingTree and author of “Ask Questions, Save Money, Earn More.”
“With diets or with money, these fads sometimes flare up, but the truth is that to succeed in eating healthily or saving money, you just have to do the same boring things, over and over again, over and over again. time,” Schulz said.
“It may not make for great TikTok content, but it’s definitely the wisest way to go,” he added.
A better way to save
TikTok’s latest savings trends seem like a good idea “with a relatively low ceiling,” Schulz said, however, “if there was ever a time when you shouldn’t put your money in a binder, it Today is where you can get 4% for 5% or more returns on these high-yield savings accounts.”
After a series of interest rate hikes from the Federal Reserve, some high-yield online savings accounts now pay even more than 5%, according to Bankrate.com, well above the rate of inflation.
For example, if you have $5,000 in a high-yield savings account that earns 5%, you will earn about $250 in interest per year.
Other Disadvantages of Keeping Cash
Hiding cash not only deprives you of the best returns in decades, but also leaves you vulnerable to theft and could deprive you of the protections offered by consumer banking.
Whether and to what extent you are covered in the event of a burglary may depend on your home insurance policy, while banks are covered by the FDIC, which insures your money up to $250,000 per depositor per account ownership category.
Veterinary financial advice on social media
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