Managing your money using savings pots

For the jam jar method to work, you first need to have a clear picture of how much money you have coming in and where it’s going each month or week.

Next, look carefully at everything you spend money on – and decide which of them are ‘needs’ and which are ‘wants’:

• Start by listing your needs – these are your rent or mortgage, and other essential bills such as gas and electricity. This also includes keeping up any repayments you have on credit cards or loans.
• When the basics are taken care of, look at your wants. These might be extras, such as going out and hobbies. Or they might be longer-term goals, such as saving for a holiday.
• If you can’t afford all your wants, you’ll have to decide which matter most to you or look at ways of cutting costs.
• Imagine a jug filled with water that represents the money you have coming in each month. Now imagine some empty jam jars – one for each thing you need to pay for each month. Then decide how much money to put in each jar.

When you have a clear picture of your spending needs each month, it’s time to decide what type of container you’d like to use for your budgeting.

You can either use real containers, such as jam jars or envelopes, or set up separate bank accounts for each type of spending.

When budgeting using real containers, you take cash from the allocated jar to pay each bill as it comes in. You also do the same before you go shopping.

Instead of using containers, some people prefer to set up separate bank accounts to cover different types of monthly spending.

To help you work out how many accounts to open, group your needs and wants into just a few main areas – for example:

• rent or mortgage
• vehicle and transport
• bills
• emergency savings
• celebrations and/or holidays.

When you’ve opened a separate account for each area of spending, you need to ask your bank to:

• set up standing orders that automatically transfers money from your main account into these extra accounts one or two days after you’ve been paid
• set up a Direct Debit for each of your bills.

For both your main account and bills accounts, look for a current or basic account that allows you to set up Direct Debits and standing orders.

Also check that the bank doesn’t set a minimum amount of money that you have to pay into the account each month.

Comparison websites are a good starting point when trying to find a current account that best suits your needs. Be aware that comparison websites won’t all give you the same results. 

Here are a few websites to compare current accounts:

• MoneySavingExpert
• Which?
• If you live in Northern Ireland, The Consumer Council

It’s also important to research the type of product and features you need before making a purchase or changing supplier.

Jam jar accounts are designed to let you divide your money into different ‘jars’ within a single account.

Jam jar accounts normally work like this:

• When money comes into your account, an agreed amount is set aside for essential bills.
• These bills are then paid via Direct Debit or standing order.
• The money left over is available for you to use, either on a pre-paid card or you can withdraw it from a cashpoint machine.

Jam jar accounts aren’t widely available, but some credit unions offer them. To find your local credit union, visit these websites:

• In England, Wales or Scotland – Find Your Credit UnionOpens in a new window
• In Northern Ireland – Irish Federation of Credit Unions or Ulster Federation of Credit Unions

You can also search online for ‘jam jar accounts’ to see where you can get one and to compare different providers’ fees and services.