Paying with British currency
Paying in cash forces us to make choices we don’t have to think about when we use our cards (Picture: Getty Images/iStockphoto)

We’ve been gradually moving more and more to a world of cashless spending as contactless, then cardless, let us tap to pay. It’s fast, convenient, and possibly keeps our money safer.

But it’s also too easy to pay without thinking, which can result in unplanned or unaffordable spending.

How often have you not really checked, or even processed, the amount you’re paying? Or made multiple purchases without appreciating the compound result on your bank balance?

This isn’t really a problem with good old-fashioned coins and notes. Remember them? It could be a while since you’ve actually had cash on you. Maybe this will help. Picture yourself in a pub, and imagine they don’t take cards. Or maybe you’ve just forgotten yours. It’s OK, though, as you’ve got a £20 note from your gran for your birthday and it’s in your wallet. Thanks gran, lifesaver.

You don’t quite catch the total you need to pay for your double G&T. Before you’d just tap and deal with it later, but now you need to ask the barman ‘how much?’ (add an exclamation point if you’re in a Central London bar). You whip out your twenty and hand it over, and don’t forget your change.

Another round? Absolutely! Hang on though, you need to check you’ve got enough left. You do – just. But you fancy food, too, and there’s not enough for both. There’s a decision to be made. Then brainwave. You can get a single gin and some chips and still have some money left over for the bus. Winning.

Sound familiar? Maybe not at a pub but managing money when it was just cash was simple. It wasn’t brain surgery. We all know this is how we should spend, and we are capable of it. But for some reason abstract amounts moving digitally in the background don’t force us to think more about our spending. We often need tangible cash in our hands to behave like this.

Andy's Best Buys: Five apps for splitting your money

Overhead view of young Black woman managing online banking with smartphone sitting on the sofa at home.
These apps will help replicate the benefits of spending cash – but without the risks (Picture: Getty Images)

If you like the idea of digitally dividing your bank balance into smaller dedicated sub-accounts, then these five free apps are all worth a look

Monzo

The digital bank’s Pots feature was the first to popularise dividing your finances into separate sub-accounts. There’s a Salary Sorter feature that will automatically divide your income across each Pot.

Starling

In Starling these sub accounts are called Spaces. You can set a budget for each Space, which will help you keep track of your spending in each category.

As with Monzo, you can pay direct debits and standing orders from each Space. Setting up a dedicated ‘bills’ account will allow you to ringfence your essential spending.

Chase

Rather than sub-accounts, Chase lets you set up extra current accounts, each with their own account number. The standout feature is the ability to choose which of these accounts you want to connect your debit card to before 
each purchase.

HyperJar

Rather than a full bank account, this app is built around the jam jar technique. Its clear layout means it’s the closest you’ll find to the real thing.

It’s possible to share your jars, too, so joint spending can be tracked across the household. You can also automate payments from set retailers to come from a specific jar, for example Tesco or Aldi could always come from ‘groceries’.

Zopa

This is a savings account, so you’ll need to transfer the money to your current account to spend it. But the benefit is each of your easy-access pots will earn interest, currently 1.81 per cent which is one of the highest available right now.

For more details on these accounts head to the banks section of Be Clever With Your Cash.

Why does this matter? Well, knowing exactly where our cash goes is becoming more and more vital as the cost of living crisis reduces our spending power. And it’s no surprise that the Post Office reported a 20 per cent increase in cash withdrawals in July. It’s likely that rather than spend on cards until the money runs out (or keep going into an expensive overdraft), more people are using physical money to control their spending.

There are different approaches. The classic jam jar or envelope method would allocate your weekly funds by expense. Perhaps a tenner goes in travel, fifty in food, a fiver put aside for fun. Or you can be more fluid, perhaps by budgeting for a day or night and taking with you only what you can afford (and leaving your card at home).

But using cash is not risk-free. Following the pandemic many businesses remained cashless, and if you miscalculate you could be left without funds to buy essentials or get you home.

Plus you’ll need to have access to a bank, ATM or Post Office to get hold of the cash, not helped by branches closing weekly. And if you withdraw large amounts and lose it, there’s no way to get it back. So a hybrid approach might be necessary, along with some discipline. You split the money out to make sure you don’t overspend, but you’ve still got your card on you.

Alternatively you can use the same principles but go digital. Bank accounts with separate sub-accounts, such as Monzo’s ‘pots’ or Starling’s ‘spaces’ work in the same way as the jam jar technique.

You segregate your money by spending type in advance, then move it to your main account as you need it. You’ll still have to address how much you can afford, what you’re considering paying and the impact on your total balance.

If you are worried about overspending and having enough money left to last the month, it’s worth trying one or all of these methods now, and hopefully you’ll be able to keep control.

Andy Webb is an award-winning blogger and podcaster from Be Clever With Your Cash. Follow Andy on Twitter, YouTube and Instagram via @andyclevercash

If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join our Facebook Group, Money Pot.

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