These days current accounts to save can offer better rates than a savings account.
In a topsy-turvy world of ultralow savings rates you have to think outside the box when it comes to maximising your saving potential. I remain firmly on target for the £5,000 Challenge for the first quarter of the year and as we approach the end of Q1 I want to ramp things up quite a considerable notch.
The £5,000 Challenge is the first milestone on my way to financial freedom. It will go towards the deposit for my first mortgage. Since starting it eleven weeks ago I have come to realise that I can do so much more.
The time to get super organised and take it to the next level has come. I have spent the last month setting up a network of high interest piggybanks – the Piggybanking Technique – to maximise every penny possible. Here’s how I have done it and you can too:
Make A Plan
In order to put my network of piggybanks in place I had to decide my main categories for spending and why:
- We’ve all got them and we’ve all got to pay them!
- I need to make sure I have money to live a little otherwise it won’t be long before I’m dipping into savings I shouldn’t. If I have a week where I think it may take me over my £100 weekly allowance it must be saved from the previous week, it can never be borrowed from the next week.
- Help To Buy ISA
- I’ve had this in place for two months so now I’m restricted to the maximum £200 monthly deposit.
- Mortgage Deposit
- This was crucial due to the deposit restriction on the Help To Buy ISA. I will put the other £200 I budgeted for the mortgage deposit in here.
- We have a couple of special dates coming up this year, my mums 60th followed by our 10 year anniversary and we’ve decided on holidays for both of them. It’s crucial I prepare and save to make sure I’m not dipping in elsewhere to fund them in emergency.
- Emergency fund
- You just never know what is round the corner and it’s better to be safe than sorry. An emergency fund is a must.
- When I’m ready to put down the deposit on a house I am going to have to look further afield than the area I currently live in as the house prices are crazy. Moving will mean I’ll need a car to get to work so I’m preparing for it now.
Lay The Foundations
I already had three of the accounts that I needed, all with Santander. A Basic Account, a 123 Current Account and a Help To Buy ISA, leaving me with four to find. After a bit of research I decided upon two current accounts based on their impressive 5% interest rates fixed for 12 months – Nationwide’s FlexDirect and TSB’s Plus Account.
Once opened I was able to open a Nationwide Flexclusive Regular Saver account and a TSB Monthly Saver account to run alongside my current accounts. These came with a 5% interest rate too. Seven accounts for seven spending categories in place and ready for the next stage.
Connect The Network of current accounts
With the Piggybanks in place it was time to connect them to form a network, whilst juggling the minimum deposit limits on all three current accounts.
If it looks a bit too much hassle keep in mind you only have to do this once! This is how I prepared the accounts so they can work to their full potential:
Santander 123 Current Account – £5 Monthly Fee
- My wages are paid into this account covering the minimum monthly deposit of £500
- £200 is transferred to the Santander Help To Buy ISA
- All my bills are paid by direct debit so I leave enough to cover them – plus a little extra just in case of any hiccups. I earn between 1% to 3% cashback for paying my bills by direct debit. It covers the cost of the account and leaves a very small profit
- I have a standing order set up to give me a £100 a week spending budget which is paid into the Santander Basic Account
- £1,000 is transferred to the Nationwide FlexDirect account by standing order
Nationwide FlexDirect Current Account
- The transfer from the Santander 123 account covers the minimum monthly deposit of £1,000
- £200 is left in this account towards my mortgage deposit
- £100 is transferred by standing order to my Nationwide Flexclusive Regular Saver towards my emergency fund
- £700 is transferred to the TSB Plus Account by standing order
TSB Plus Current Account
- The £700 transfer from the Nationwide FlexDirect account covers the minimum monthly deposit of £500
- I leave £100 in this account which is saved towards my holiday fund
- This account also gives me 5% cashback for the first £100 I spend every month using the contactless function on the card. So my £100 shopping budget will be spent on this card and it will earn £5 a month. That’s £60 a year extra towards my savings just for buying things I need!
- £100 is transferred to the TSB Monthly Saver account towards a new car
- The remaining £500 is transferred back to my Santander 123 account to go towards my £100 weekly spending budget
Three current accounts all working in tandem with each other!
Watch It Grow
The network is now connected and ready to fully maximise my saving potential. It ensures that all the minimum deposits are covered in order to make sure I receive the 5% interest rates and gives me a constant flow of money every week. Most importantly I can say goodbye to the days of waiting for payday as payday is now every week
What could it potentially earn?
Providing you didn’t touch any of the savings, over the year you would have saved/earned something like this:
|Santander Help To Buy ISA||£2,400.00||£22.12||£605.63||£3,027.65|
|TSB Plus Account||£1,200.00||£27.89||£60.00||£1,287.89|
|Nationwide Flexclusive Regular||£1,200.00||£27.89||£0.00||£1,227.89|
|TSB Monthly Saver Account||£1,200.00||£27.89||£0.00||£1,227.89|
Personally I plan on spending my holiday money but I still should land around the £8,000 mark, a £3,000 increase on my original target. I’ve also got £800 already banked in my Help To Buy ISA + the interest + the add on. If, fingers crossed, all goes to plan I should have just over £9000.
The main thing I’ve learned is preparation is key. Once the current accounts are all set in place it takes care of itself – I’m in full control of my finances. I’d hope that over the coming months I have lived frugally enough to have built up a surplus, by skimming some off my weekly budget here and there. I will also look to generate a few side hustles to increase my earning and saving power even further.
You could alter this to suit any earnings, regardless of whether your saving and spending budgets are higher or lower, by following this plan you could get organised and get financially healthy.
Do you have any other saving techniques? Have you ever tried Piggybanking? Please leave comments below, I’d love to hear your thoughts.
He is also a contributor to Clear Debt, ICOUNT Money and M1 Debt Advice blogs discussing all things personal finance.