What’s piggy banking? Save money with piggy banking
‘Piggy banking’ is a simple but powerful budgeting technique that can help you keep your spending under control.
Money-saving gurus love it, and we see it crop up on social media all the time. It’s gained a huge following because it’s simple to do, and helps you see your spending more clearly.
How does piggy banking work?
Piggy banking involves setting up multiple piggy banks (or Monzo Pots) and splitting your money between each one. You use the money in each piggy bank for a different purpose – like bills, groceries and new clothes.
It makes it easier to see how much you’ve got left for each type of spending. And helps ensure you have enough set aside for the essentials, like bills and rent.
Here’s how to start piggy banking with Monzo. If you don’t have a Monzo bank account yet, download the app to get started.
1. Balance your budget
First up, you need to make sure you can afford your expenses. This is called balancing your budget. It involves comparing what you expect to earn with what you plan to spend, and deciding where to cut costs if needed.
It’s really important not to skip this part – 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.
Monzo simplifies spending and budgeting which will hopefully make this step less of a chore.
2. Categorise your spending
Next, group your spending into a few different categories, like:
Rent or mortgage
Bills
Groceries
Eating out
New clothes
Holidays
Savings, investments and debt repayments
Then create a piggy bank (or Monzo Pot!) for each one.
3. Decide how much to spend on each category
Decide how to split your income between your different piggy banks. You should already have an idea about how to do this from the first step (balancing your budget). And because Monzo already groups your spending into some of these categories, it should be easy to see how much you’ve spent in the past.
It’s a good idea to slightly overestimate the amount you’ll need for bills and other essentials, just in case. And don’t forget about big annual expenses like Christmas. 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 its own piggy bank. If you use Monzo Pots, our Salary Sorter tool will even do it automatically after you get paid.
Next, personalise each Pot with a name, and add to it soon as you get paid. Then when you need to pay for something, take the right amount out of the right Pot, or set up a scheduled payment.
Thinking about smashing your piggy bank early? You can lock your Pots so you’re not tempted!
UK residents only. Ts&Cs apply.