The simple 52-week savings plan

AT THE beginning of every year, I like to tell people about the 52-week savings’ plan, and I do so for very good reason – it works.

I always get very positive feedback from people who implement it, especially those who find it difficult to save or save on a regular basis each month. Their problem is that they save what’s left in their account at the end of every month and that can be a reasonable amount or nothing at all.

And when it’s nothing at all, they tend to give up trying anymore because they think what’s the point?

They blame their lack of saving on their high outgoings and/or perhaps because they’re not earning enough and that could very well be the case, but if you break down the amount they save each week to small amounts that gradually increase week by week, it makes their goals of getting into the habit of saving and building up a reasonable amount, that little bit easier.

And the method I’m going to tell you about can be used for any number of different purposes i.e. it could be next year’s Xmas club, it could be money used towards a holiday or it could be used to pay off debt. What you’re going to use it for is not nearly as important as the method you’re going to use to get you there.

For example, let’s say you want to have €1,400 in your account in 12 months’ time, the simple math on that is that you either save €116.67 per month or €26.92 per week, which might be a challenge for some people but there’s another way you can end up close to €1,400 and it starts off by saving €1 in week number 1.

And it would be real easy if there were 1,400 weeks in the year and you could stick to saving €1 a week, but as the number of weeks in the year increase, so does the amount you save.

Let me explain some more.

The premise behind this savings plan is that you save incremental amounts every week starting with €1 in week 1, and for each subsequent week you increase your savings by a further €1.

An example of this is:

Week 1 you save €1

Week 2 you save €2

Week 3 you save €3

Week 4 you save €4

All the way until week 52 where you save €52 and if you follow this method at the end of the year you’ll end up with €1,378.

People who follow this savings plan, typically record their savings on a chart or on an excel spreadsheet where they tick off the money they’ve saved each week. And the money doesn’t have to be deposited into a bank account either if you don’t want to. It can be placed in a jar or into an envelope. Any place really where you can see it and where it can be kept safely.

The idea behind this savings plan is a good one, but there are a couple things you need to be mindful of and they are:

The immediate results will be small. And motivation levels can wane because at week 26 when you are halfway through the year, you’d only have saved €351, so you’ve got to be aware of this, and you’ve got to stick to the plan.

And as you are coming towards the end of the year, the amount you have to save increases and it increases by a lot. In November, for example for you to stay on track you would have to save c. €235 in that month, whereas in January you would have saved just €15.

And for some it might be a whole lot harder to save money at particular times of the year with November and December being good examples. And of course there will be other months as well that might be difficult i.e. when kids are going back to school, if and when you are on holidays during the summer etc.

The good news however is that there are many variations to this savings plan and they can be modified to suit you and your finances giving you more flexibility to continue to save and succeed over the long term which of course is the objective of this exercise.

My first suggestion at modifying the original idea is by doing it in reverse, i.e. start off by saving a decreasing amount each week.

Rather than save €1 in week 1, why not save €52 in week 1 and €51 in week 2, etc. because if you do this, by the time you reach halfway in week 26 you will have saved about €1,027.

By doing this you are seeing much more immediate results and you’ll have something real and big to show for your efforts.

And yes of course saving €250 in January for some could be a big ask and €15 is much easier, but the reality is that you could be more motivated and more enthusiastic at the beginning of the year when your motivational levels are at their highest. Perhaps you’ll be glad if you do the heavy lifting now because come December time, when Xmas is upon you, all you will need to save that month to hit your target is €10.

And if €250 seems overwhelming and too big an amount to start off with, then find a lesser number, but don’t go for too low an amount either. Ideally you want to find a number that hurts a little but isn’t too much of a stretch either.

Another variation of the savings’ challenge is where you save in increments of €2 each week for the first 26 weeks of the year and for the last 26 you decrease the amount you are saving by €2 each week.

And I like this method because it makes saving at the start and end of the year easier. The months where you biggest outlay are in the middle of the year, something you can plan for in advance.

Again this is just another variation on the original plan and might make it a little bit easier for people to stick to that savings habit for the whole year.

The challenge for many people using this method or any other for that matter can be that they find it difficult to save money, particularly the week before they are due to be paid. So, in order to overcome this, consider saving the entire amount in any month in one go, and that’s when you get paid and have the money.

It’s the classic, pay yourself first advice and doing it at the beginning of the month rather than in the middle or at the end, will help because you will get used to managing your income minus your savings because you can’t miss what you don’t have, or can’t see.

If none of the suggestions suit you then simply create your own savings challenge which meets your needs. And maybe that’s’ saving every two weeks, or maybe the amount you save is a fixed amount each week or month and it doesn’t increase or decrease. You know your finances better than anyone else and you know what you are capable of, so create a plan that might be a hybrid of some of the suggestions I’ve given you.

And please don’t anchor your savings target at an amount of €1,378 each year which is the amount you would accumulate if you follow this savings plan. If you can save more each month then please do so.

I think what’s really important to bear in mind and this is something I am always at pains to say that the amount you save is not nearly as important as (a) starting to save in the first place and (b) getting into the habit of saving on a consistent basis. Like anything, once this habit is formed, it can be difficult to break it.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey. He can be contacted at liam@harmonics.ie or www.harmon5ics.ie