How to save $10,000 in a year using the ‘27.40’ rule

Here’s a cool fact: if you sock away $27.40 a day for a year, you’ll have saved $10,000. It’s called the “27.40 rule” in personal finance, and while that number can sound intimidating, the savings strategy behind it is that it’s far less so if you break it down into a daily habit.

A few years ago, I ran a little experiment called “My Daily Save.” Anyone on my newsletter list could opt in to receive a daily reminder, a gentle nudge to transfer a small amount of money into their savings account. The magic of this system wasn’t in the dollar figure — it was in the habit. When my community members saw that daily email, clicked through to their bank account and made the transfer, they were telling themselves, “I’m the kind of person who saves.”

And guess what? Most participants exceeded their $10,000 goal, and felt amazing doing it. 

The mechanics of how the 27.40 rule works

You’ll want to open a high-interest savings account (HISA).

I know; rates coming down has influenced interest rates on HISAs, too, meaning the interest is kind of piddly. But it’s still higher than a basic savings account, and certainly better than earning nothing at all on a chequing account.

Next, you’ll want to ensure you can either automatically transfer this amount daily, or that it’s a cinch to do it manually (less than 15 seconds) through your online banking. You’ll schedule the daily transfer from your chequing account into this dedicated HISA. Personally, I prefer the automated approach, but I have seen people thoroughly enjoy going into their online banking every day and making this transfer, and celebrating their savings effort by watching the money grow. Just make sure there are no fees on your HISA or these transfers!

Where does this money come from?

For some, $27.40 a day is a comfortable number, and for others, just seeing that number makes it feel like too great a challenge.

I like to think of this next part as a bit of a financial scavenger hunt. The money is probably there, in plain sight, but is currently overlooked. We’re going to shine a light on it.

Start by taking a pause and really thinking through your typical day. As an example, for a parent, it could look like dropping the kids off ($0), buying a coffee ($7), firing up your laptop at work ($0), popping out to run an errand ($50), grabbing a sandwich on the go ($10), filling up the car before getting your kids ($75), taking them for their activities ($25), picking up some dinner on the way home ($40), going to your workout class ($18), enjoying a show from one of the four streaming services you have ($65/month), going to bed. Are there opportunities to save? Yes.

Now think about an atypical day that happens once a week or once a month, that has something special happening, like a meal out with friends ($100), or shopping ($75) or playing a sport ($40). Are there opportunities to save? Yes.

What comes up as a savings opportunity when you step back and think about some of your current daily spending habits?

Where my community has found their savings

Return unused purchases. Especially after we head into the holidays, there’s always something that won’t be used or gifted or loved. Bring it back and put that refund toward your savings.

Cancel unnecessary recurring expenses. Hit pause on anything non-essential like subscriptions, memberships and impulse buys. Cancel accounts with fees, and find free options. Redirect that money into your savings goal.

Sell what you don’t need. Got an old tablet, phone or exercise equipment collecting dust? List it on Kijiji, your local swap-and-sell website or Facebook Marketplace, and raise a bit of extra cash for your savings. This is a great way to clear clutter, too.

Lay low and choose inexpensive entertainment. This could be choosing a completely free activity to do with a friend versus going for dinner, or renting books from the library rather than buying one.

Redeem rewards points. Use points for groceries, gas or household essentials so you can divert that cash into savings instead.

Earn a little extra. If you can, take on extra shifts, a freelance project or a side hustle. Every additional dollar speeds up your progress.

Completely eliminate food waste. According to Second Harvest, repurposing leftovers, eliminating food waste and planning meals can save a family of four up to $1,700 a year. Keep your extra rice for a stir fry, make next-day lunches from dinner leftovers, and plan your meals at least five days in advance. Meal planners report saving 20 to 30 per cent on food costs, and they tend to eat healthier too.

One of my community members audited her multitude of subscriptions and memberships and came up with $475 per month of savings in just one review by cancelling these. With this momentum, she went on to sell some furniture, raising another $1,200, and then sold her car.

If you try the $27.40 daily savings rule and hit that goal of $10,000, doors will open. You can use the money to clear debt, invest for retirement, complete overdue repairs, build an emergency fund, add to your down payment fund and so much more. Happy saving!

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.