The jam jar method (also known as piggybanking or using saving pots) involves dividing your money into separate pots for different expenses. It's a simple way to stay in control of your spending and make sure your bills are covered.
Before you start – make a budget
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.
Budget planner
To help you manage your money, try our free and easy-to-use Budget planner.
Choose your spending priorities
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.
The jam jar method
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.
You could also have a 'wants' jar for your fun money. Once it's spent, set yourself a clear rule not to dip into your other jars to cover further wants – this helps you stay in control and avoid overspending.
Choosing your budgeting method
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 as digital 'jars' for each type of spending. Each approach has its advantages and drawbacks.
Using real containers such as jam jars or envelopes
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.
Do you have any cash left in the jars at the end of the week or month? Then try to get into the habit of putting it towards an emergency savings fund
Pros
-
This method works well if your money comes in once a week but your bills are monthly. Putting money into a jar each week makes it easier to pay the bigger bills at the end of the month.
-
Having cash in containers gives you high visibility of your budget. You can physically see how much you have left, which might help you spend less.
Cons
-
Paying for everything in cash isn’t always convenient or even possible.
-
You’ll need to be extra careful about security if you keep your entire weekly budget in the house.
-
You’ll miss out on the perks of paying bills by Direct Debit, such as cheaper tariffs and having your bills paid automatically.
-
Your money won't earn any interest while it's sitting in a jar if you’re trying to save.
Using digital 'jars' – separate bank accounts
Many banks now let you set up multiple accounts or 'pots' to organise your money digitally. You allocate money to each pot in the same way you would with physical jars.
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.
Find out how to set up Direct Debits and standing orders
Pros
-
Your money is safer than keeping cash at home.
-
It's easier to track your spending and move money between pots when needed.
-
When your standing orders have been paid, you can spend from your main account without risking not having enough left for important monthly bills.
-
It’s a great way of spreading the cost of those once-a-year items like holidays, Christmas and car tax.
-
You may be able to earn interest on your savings pots.
Cons
-
Digital budgeting can feel more 'out of sight, out of mind' without the physical reminder of cash, it may be easier to lose track of what you're spending.
-
You’ll need to manage all your accounts carefully to make sure you stay in credit and don’t get fees or charges.
-
Opening multiple accounts might affect your credit score.
Choosing the right type of account
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:
It’s also important to research the type of product and features you need before making a purchase or changing supplier.
Find out more in our guide Get the most out of comparison websites
Compare current accounts
See all the fees and charges that apply to bank accounts – showing everything from overdraft fees to foreign cash withdrawal charges.
Check if your account offers “jam jar” features
Some banks offer features that let you set up different pots for specific purposes. Depending on the bank you choose, the features can make it quick and simple to keep funds in separate pots and move money between them.
Think of these pots rather like digital piggybanks - a a place in your account where you can separate some of the money from your current account keeping it separate from your spending. Some banks even allow you to lock your pots in case you're tempted to dip into them.
Most of the newer digital-only banks offer savings pot features and some traditional banks offer the ability to create separate accounts. Ask your bank if it offers these features.
MoneySavingExpert offers a good overview of the main digital banksOpens in a new window and what features and benefits they offer.
Jam jar accounts
Jam jar accounts are designed to let you divide your money into different ‘jars’ within a single account usually provided by a credit union.
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.
Pros
-
You only have to manage one bank account.
-
The account provider usually manages all your Direct Debits and standing orders for you.
-
These accounts sometimes come with budgeting advice.
Cons
-
You’re charged an administration fee of between £2 and £10 a month. However, some social housing landlords and councils have been working with credit unions to offer tenants current accounts with lower fees. If your landlord is one of them, they might pay the administration fee for you.
-
It can be difficult to source a specific jam jar account.
Join our Facebook group
Join our private Budgeting and Saving Facebook groupOpens in a new window for money-saving tips and support from a community of savers.
Opening a jam jar account
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.
