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 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 with Monzo 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:
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.
You can do this with Monzo by separating your money into different Pots. Salary Sorter will even help you do this automatically after you get paid!
Tempted to smash your piggy bank early? Why not lock your Pots until a particular date, like when you need to pay a bill.