Spend enough time on money-saving blogs and you'll come across plenty of people casually dropping the term "piggy banking" in the comments and forums. Are these people really stashing all their money in a giant ceramic farm animal instead of a bank? No. But they are taking part in a money-budgeting technique that a lot of people find incredibly useful.
Piggy banking is not new. It's been around for yonks. But it is a lot easier to do today than in the past. Essentially, it's structured budgeting that involves setting up different accounts for different purposes, creating standing order transfers to each one every month, then sitting back and realising in glee that when the time comes to book and go on your holiday, you've got a fully stocked bank account ready to pay for it. Sounds nice, doesn't it?
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Another benefit is that if an unexpected bill comes in (read: your roommate "forgot" to pay for a new TV licence and now expects your half asap), you've got a spare bit of cash there to cover it.
So, the bad news: you've got to put in a bit of hardcore organising first. But the benefits are totally worth it.
How to do it
Firstly, you've got to work out where your money goes each month. If you've got a Monzo card or something similar, or a spending app you've actually committed to, then you're already there as you'll have a breakdown of your monthly payments into easy segments like "groceries", "transport" and "bills". If you're thinking, "What's a Monzo, I still get paper statements from my high street bank", then grab last month's statement and work out where your money goes yourself – yes it might be painful, but you're about to put an end to unwanted financial surprises.
Choose the five biggest areas of spending. MoneySavingExpert gives the example of bills, big purchases, holidays, Christmas and "savings and emergencies". For you, though, Christmas might not be such a big expense, ditto for big purchases; if you're renting a furnished flat, sofas, cars and kitchen installations might not be high on your money hit list right now.
Judging from our Money Diaries, and our readers in the Money Diary Facebook group, a few big spend areas might be "rent", "saving for a house", "holidays", "bills" and "emergencies".
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Once this is established, you need to set up different accounts for each of these areas. You can do this in maaany different ways (if you've got piggy banking sorted already, let us know in the comments how you handle it). Some banks will let you open multiple accounts (beware: some will charge); alternatively you could set up different accounts at different banks. If this all sounds too complicated (and tbh, it probably is in 2018), banks like Monzo and Starling offer an in-app, streamlined version of piggy banking you can slide on into super quickly (just head to "pots" in the Monzo app; in Starling, it's under "goals").
If you've gone down the different bank accounts road then it's important to remember the next step: set up standing orders with the amount you want to allocate to each account each month the day after payday. Work out how much you spend on each section and pay into your new accounts accordingly – if you owe £250 for council tax, utilities, gym and Netflix each month, then setting up a standing order for £100 to your new "bills" account isn't going to cut it. Make sure you're covered, and then some. Rent and bills and necessities accounts need to be set up first, holidays later – once you work out what you can afford to save.
The idea is that you're then left with exactly what you've got to spend for the rest of the month in your main account. There's no "oh crap, I forgot about that £40 that was going to come out for my insurance" when you're trying to buy groceries and your card's declined; no "darn it I said I was going to save for my holiday this month but I guess I'll just put it on several credit cards instead". You've got cash set aside for what you need.
To be perfectly honest, in 2018, this sort of budgeting can be done SO simply through a "millennial" bank; it's almost certainly more effort to research and set up different accounts and standing orders for each thing you want to save for. Getting yourself a new account like Monzo or Starling (just download the app and plug in a few details, the card will follow in a few days) is probably a better option for those just starting out on the saving path.
But hey, we all function in different ways and what works for some people may not work for others. If you've got a different version of piggy banking that works for you, or another budgeting method altogether, then let us know in the comments. Together we can totally take over the world.