Enthusiastic about making an attempt the 100 envelope problem on TikTok? You are not alone. Cash is one thing we’re all worrying about an increasing number of. In spite of everything, it is no secret that because the price of residing continues to rise, the typical wage is not precisely maintaining. In 2023, 31% of Gen Zs claimed to be fearful about their monetary scenario. A 2024 research discovered that just about half of younger folks have “cash dysmorphia”, an nervousness about funds that occurs even when the person is comparatively financially steady.

On this local weather, it is hardly a shock that younger persons are trying to find hacks to save lots of just a little further every month — on TikTok, as an illustration, a brand new saving problem is choosing up steam. The 100 envelope problem sees folks stowing away further money daily 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 considerations that it’d really be making our monetary anxieties even worse, whereas concurrently being an ineffective saving methodology.

“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 sure 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 ultimately save £5,050.

Is the 100 Envelope Problem too good to be true?

In accordance with Leetham, the problem might have too many downsides to be price making an attempt. For one factor, though breaking down financial savings into 100 components 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 take a look at how a lot cash you’ll be anticipated to save lots of every month you realise it’s finally futile until you’ve received a lot of disposable earnings,” she says. “Contemplating the typical internet month-to-month earnings within the UK is £2,297 based on ONS, I believe you’d wrestle to maintain up with this problem.”

In some circumstances, being unable to maintain up with the problem may even have an antagonistic 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 folks feeling disaffected and never wanting to have interaction anymore.”

There’s one other draw back, too — saving bodily cash in a folder might really feel nice, nevertheless it’s not really a sensible saving methodology. In spite of everything, you will not accrue any curiosity in case your cash is just sitting in a binder in your desk. “In the event you have been to save lots of that cash in an internet financial savings account, you’ll additionally profit from the extra curiosity in addition to your financial savings,” she suggests.

Is there a better solution to do the 100 Envelope Problem?

Leetham recommends making an attempt an analogous methodology with an internet financial institution, corresponding to Monzo’s 1p Financial savings Problem, which is way more achievable. “On January 1st you’ll save 1p and on December thirty first you’ll save £3.66,” she explains, including, “Even for those who’re late to the occasion and need to be a part of on this yr, it will solely price you round £40 to catch up.”

Plus, this type of problem means you’ll profit from curiosity.

“I might wholly suggest this problem as a solution to dip your toes into saving,” she says.