Editor’s note: This article was first published in August 2015, and the author says he started the game in early August 2015.
When it comes to personal finance, there are countless savings strategies and probably as many tips as there are experts in the field. Some methods can be more complicated or harder to carry out, and others may seem a bit absurd.
Well, if a method worked for someone, it isn’t absurd. It’s simply a matter of choosing the plan that suits us best. And there’s always one (as long as we’re willing to draw up a plan).
The systematic €5 savings strategy
Some people will think this strategy is silly, but believe me, it isn’t. And it doesn’t replace any other savings plan. It’s a complement.
Every €5 note that passes through your hands, don’t spend it. Keep it. In other words, if you decide to follow this strategy, when you have a coffee and pay with a €20 note, the change will usually include a €10 note and a €5 note. That €5 note can no longer be spent. It has to be put away.
Try to condition your brain so that, for you, a €5 note is useless as payment or change. So in this kind of game, every time a €5 note lands in your hands, it’s as if you had landed on the black square of a board game: you’ve lost the €5.
That way, when money is tight, you’ll have to find ways to avoid being given €5 notes.
We’re going to try to make sure you never look at a €5 note the same way again. We’re going to see them as worthless “tokens” that will be useful for something at some point in the future.
Goal of the game: “a minimum of 10 years”. And I insist that this game doesn’t replace any savings plan you already have in place.
See also: Why keeping your old car isn’t as expensive as you think
Step 2
You can play this game in two ways:
- At the end of each year, take all the €5 notes you’ve saved out of their hiding place and put them in an account that earns some kind of interest or, if you’re ready to invest, put them into a low-cost index fund or even a dividend-paying stock.
- Don’t touch the money in those €5 notes until the 10 years are up. You’ll be pleasantly surprised.
This is a plan many families have used for a long time, while their children are small, and thanks to this kind of plan or game, that’s where the money for university comes from, or for the down payment on “something”.
Others use it to put money aside while they learn about investing, and that becomes the money they invest.
But this money is not an emergency fund. As I said at the beginning, it complements any other pillar of financial education.
This game gets rid of the problem that arises when people save on small expenses but end up spending that money on other things.
Some people use it to pay for holidays, a wedding and so on, but personally I wouldn’t use it for that. That money should be treated as lost until, at some point, it becomes a gift.
Some other people used a similar method when they quit smoking, since you have to replace a bad habit with a reward. Putting the money we used to spend on tobacco into a piggy bank every day becomes a reward.
Some people tell me that doesn’t work, because they quit smoking and didn’t save anything. My answer is that they had enviable willpower to give up tobacco but very little willpower to stick to a financial plan. A bit ironic, but it happens very often.
What happens if you decide to take this game seriously?
Curiously, the people who decide to take it seriously will split into two types:
- Those who will be annoyed at being given a €5 note: they’ll be annoyed because they probably “know” they can’t afford this game, since they’re short of money to make it to the end of the month. So it’s a matter of finding a way to earn €5 or more (29 ideas for making money from home).
- Those who will be eager to save as many €5 notes as possible: these people probably know they can afford it, and are keen to grow their savings.
The answer to the question some of you are thinking
I know some of you are wondering: “What if I pay for a coffee with a €20 note and get three €5 notes in change?”
In that case, you have to follow the rules of the game. Tough luck, but you’ve lost €15. Next time, pay with loose change.
A warning
Don’t make exceptions, because what we’re also trying to develop here is discipline. Remember that people who are disciplined about one thing tend to be disciplined about almost everything; those who aren’t disciplined also tend to be undisciplined about almost everything. If a €5 note lands in your hands, it’s already useless. That’s all there is to it.
Personally, I started this game at the beginning of August 2015.
See also: 15 financial education tips that are very easy to follow and understand
Featured image: J. Triepke, CC BY 2.0, via Flickr.
