Piggy banking: Save money with this popular budgeting technique

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Piggy banking for grown-ups

Piggy banking isn’t just for kids. It’s also a budgeting technique that can help you control your spending.

The grown-up version involves setting up multiple piggy banks (like bank accounts or Monzo Pots), splitting your money between each one, then using them for different purposes (like bills, groceries or having fun).

It makes it easier to see how much you have left for each type of spending, and helps make sure you have enough for the essentials (like paying bills or rent).

For example, you might have £200 left overall, but just £30 left in your piggy bank for shopping. The rest might be in a piggy bank for bills, so you know you shouldn’t touch it.

Here’s how to start piggy banking in four steps:

1. Balance your budget

First, you need to see if you can afford your expenses. This is called balancing your budget. It means comparing what you expect to earn with what you plan to spend, and deciding how to cut costs if you need to. You can make this less of a slog by using a budgeting app, like Monzo.

It’s important not to skip this step. No amount of tips or tricks will work unless you know your income can cover your expenses. Plus, you’ll learn things about your spending patterns that can help with the next few steps.

2. Choose your categories

Now group your spending into a few different categories. Common ones are:

  • Bills

  • Groceries

  • Eating out

  • Entertainment

  • Shopping

  • Holidays

  • Savings

  • Tax (if you’re self-employed)

There’s no rule about the number of categories. Just remember that each one gets its own piggy bank.

3. Decide how much to spend on each category

Decide how to split your income between the different categories. You should already have an idea about how to do this from the first step (balancing your budget).

It’s usually a good idea to slightly overestimate the amount you’ll need for bills and other essentials. And don’t forget about big annual or one-off expenses, like Christmas presents or an MOT. You might want to update your allowances regularly to cover these. Or you could set up a separate piggy bank and put money into it every month so you’re prepared.

4. Set up and feed your piggy banks

Each category needs it own piggy bank – a place where you can pay in an allowance and keep it separate from the rest of your money. You may find it useful to automate these payments so you have one less job to do.

One option is to set up multiple bank accounts. You can set up standing orders to automatically transfer a certain amount to each piggy bank on your payday. Then pay for things with the relevant debit card or by setting up payments out of the right account.

Another option is using Pots with Monzo. This lets you set money aside from your main Monzo account, so you can’t spend it by accident. When the time comes to use money from one of your piggy banks, you can move it from the Pot into your main account. Or you can schedule payments to move money into and out of your Pots automatically.

Tempted to smash your piggy bank early? Why not lock your Pots until a particular date, like when you need to pay a bill.

Go the whole hog by combining piggy banking with other budgeting techniques, such as the zero-sum or 50/20/30 rule.