Money Advice Service

No matter what your income or financial situation, it makes sense to stay in control of how you spend your cash. The jam-jar method– dividing your money into separate pots for different expenses – is a great way of making sure your bills are covered and your money goes exactly where you want it to.

Before you start – draw up a budget

Use our Budget planner to take control of your money.

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.

You can find this out quickly and easily using our budget planner.

Choose your spending priorities

The next step is to look carefully at everything you spend money on and decide which of them are ‘needs’ and which are ‘wants’.

  • Start by listing your needs – things like your rent or mortgage and other essential bills like gas and electricity.
  • Once the basics are taken care of, look at your wants. These might be extras, such as going out and hobbies, or longer-term goals such as paying off your debts and saving for Christmas.
  • 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.

Using real containers such as jam-jars or envelopes

Once you’ve got 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.

Try to stick to a rule of ‘when it’s gone, it’s gone’.

For example, if your petrol jam-jar is empty don’t allow yourself to dip into your electricity jar instead.

Have any cash left in the jars at the end of the week or month? Try to get into the habit of putting it towards an Emergency savings fund.

Pros

  • This method works very 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 reminds you how much you’re spending during the month – and so might help you spend less.

Cons

  • Paying for everything in cash isn’t always convenient.
  • 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.

Using separate bank accounts for different types of spending

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:

  • Car
  • Bills
  • Rent or mortgage
  • Emergency savings
  • Christmas and/or holidays

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

  • Set up standing orders that automatically transfer money from your main account into these additional 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

  • Once 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.

Cons

  • You’ll need to manage all your accounts carefully to ensure you stay in credit and don’t incur fees and changes.
  • 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 for anyone trying to find a current account tailored to their needs.

We recommend the following websites for comparing current accounts:

Remember:

  • Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
  • It’s also important to do some research into the type of product and features you need before making a purchase or changing supplier.
Find out more in our guide to comparison sites.

Using a jam-jar account

Jam-jar accounts are specially 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

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 are charged an administration fee of between £5 and £15 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.

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 – the Association of British Credit Unions website.
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.

This article is provided by the Money Advice Service.