An Experiment in Saving Money

Personal finance

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Today I wanted to look at the idea of trying to make saving money fun. Most articles on saving money revolve around lame frugality tips and other tips on how you can save a few dollars by cutting your own hair (and likely looking like a clown). I wanted to look at an interesting strategy for saving money.

What’s a unique way to start saving money right now?

We all have our own unique methods when it comes to saving money. Some of us host house parties to save money on fancy dining and expensive night clubs. Others will ride the bus to work or find a job close to home. I recently heard of a really cool experiment on saving money. A good friend of mine does this with a group of family friends.

This experiment in saving money involves using a group of five people to save money together. What my friend does is he saves money with four of his closest family friends. They all roughly have the same pay day. They also roughly make the same amount (off by a few hundred dollars). Every pay day everyone puts in $500 and the money goes to one person.

How does this experiment work?

Every pay day the individuals involved in this plan take out $500 and give the money to one person. The person that gets this money is determined on a simple schedule. Every pay day a different person gets the money until everyone involved has had the money. This might sound sort of silly, but let me explain it in further detail…

What are the benefits of group savings?

I’m going to outline the benefits of this plan that my buddy shared with me.

  1. Keeps you accountable. You need to have the $500 every pay day. You’ll be letting your four friends down. They’ll want to know why you don’t have the money or what you did with your income. You’re forced to save the $500. When your turn to get the money comes, you can do anything that you want with it. You can save it. You can pay your bills in advance. You can budget for your major expenses.
  2. It’s social. You and your closest friends are forced to meet up and discuss your financial plans. This group loves to help each other out and keep tabs on everyone’s progress. The social aspect also makes it much more fun and interactive. It beats trying to save money on your own when you have a bad habit of spending your pay checks. Some of us just need that little boost of motivation to start saving money. In this case you get motivation and a system that works.
  3. It forces you to live lean. For the few pay days that you’re putting the money into the pot ($500 in this case, which is 40% of income) you have to figure out how you’re going to survive on less money. Essentially, you’re paying yourself first and getting your friends involved. You’re put in a position where you need to figure out how you can live on less.

As you can tell there are many benefits to trying this out. What are you waiting for? It’s an experiment that’s worth trying with your closest friends.

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