Embarking on my $2 a day challenge

From now on, I decided to put away a purple note each day, as soon as I received it.

Even though Singapore is heading towards a cash-light society, it is still not uncommon to use cash for day-to-day transactions. For example, we pay for our food and drinks (probably at least 3 times a day) – a high probability at least one transaction will be spent in cash, and one of the following notes being used:

Why $2 a day?

A question many would pose is, why not $5? $10? Why not a few $2s?

$10 a day amounts to $300 a month, not a small amount at all when compared against the salaries of the lower income.

$5 note is more of a chance to obtain on daily transactions. Change is easily return in $2 notes and coins.

To get a few $2 notes in change daily is usually a hit or miss. But I can say with 99% confidence level that one would get at least one $2 note on daily cash transactions under normal circumstances.

To build up a habit of forced savings, it should be so routine and easy to comply that one does not have second-thoughts before doing it. The amount must both be manageable and easy to obtain.

What could $2 amount to?

After a period of savings, this is what it will amount to:

Time periodDollar amount
1 day$2
1 month$60 (assuming 30 days)
1 year$730
10 years$7300
20 years$14,600
55 years$40,150

Assuming the savings do not stay stagnant and are invested once annually with a 4% compounded returns:

Time periodDollar amount
2nd year$759
After 10 years$8034
After 20 years$21,008
After 55 years$138,816

Why 4%? We are taking CPF SA interest rate of 4% as a base reference, though we recognise that investment returns could be greater than 4% per annum.

I thought it is also a good way to educate forced savings or basic financial literacy to your child as well. You could help them out till they are financially able to contribute $2 a day with their own efforts. By inculcating this forced savings behaviour, a mere $2 a day or $40,150 savings over a lifetime of 55 years would become $138,816 due to the power of compounding interests!

Would you not want to take up this $2 a day challenge as well?

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