Money saving apps: Monzo, the online budgeting tool
We’re all familiar with the concept of budgeting. The notion of managing your finances better is an attractive one, but it’s a lot easier to come up with a sensible budget than it is to stick to one.
Thankfully, there’s an app for that. In the latest installment of our Money Saving Apps series we take a look at Monzo, the bank and online budgeting tool, and explore what it is, how it works, and how it can help you save money by budgeting more effectively.
What is Monzo?
Monzo is one of the fastest growing financial services companies in the world. They’re a bank, but not the kind of bank you might be used to – the kind with big marble atriums and those annoying pens on strings.
Monzo is a bank that revolves around the Monzo app, which allows people to have full control of their finances from their phone. More than just letting you to view transactions, however, the Monzo app is a fully-functioning online budgeting tool.
Unlike other banking apps, Monzo allows you to create ‘pots’ of money for different purposes, lock pots to stop yourself from dipping into your savings, and set savings goals that the app helps you work towards.
What problem does an online budgeting tool like Monzo solve?
The whole idea of a budget is to help you manage your money better. To manage your money properly, you need to have an overview of every penny coming in and going out of your bank account.
In modern life, the amount of bills and subscriptions people have on the go at once can be really hard to keep track of, from priority bills like rent and council tax, to non-priority bills like gym memberships and Netflix subscriptions.
Unfortunately the budgeting tools of the past – pen and paper – make it difficult to keep up. That’s where Monzo comes in.
With Monzo, not only can you track every penny you’re spending in real time, you can actually see how much you spent each week on certain things (food, drink, clothes) and isolate the areas where you might be able to cut back.
How does Monzo work?
You join Monzo in much the same way as you would join a new bank, by offering your details and opening up a current account. Like everything else with Monzo, however, the process is self-serve – you sign up online, by downloading the Monzo app to your smartphone.
The sign-up process is relatively smooth, and involves you entering your details and uploading documents like proof of address and photo ID. Once you have created your account, you let the team at Monzo know where to send your debit card, and it should be with you in a couple of days.
Once you have your Monzo account and card set up, you’ll be able to bank – and budget – on the go. The app gives you full visibility of what you’re spending each week or each month, and the budgeting capability allows you to categorize your spending and track how much you are spending against your total budget for the month.
Monzo also styles itself as not being a bank as much as a ‘community’. It pays close attention to user feedback, and there are several support forums available on the Monzo Community page, where millions of users chat about issues they’re having with the app and work towards solutions.
Will I have to pay for Monzo?
Opening a Monzo account, ordering a Monzo card, and using the Monzo app for day-to-day spending is entirely free. There’s no setup fee, and no charge for withdrawing cash or making payments.
If you’re using Monzo strictly for day-to-day banking and budgeting, the only charges you’re likely to face are overdraft fees and fees for lifting a certain amount of money when travelling overseas (both of which are standard practice).
There are paid Monzo tiers, however. Monzo Plus costs £5 per month, and your subscription enables you to take advantage of additional features, from rewards like free RAC breakdown cover, to regular credit score checks within the app, in association with TransUnion.
Monzo Premium is the tier above Monzo Plus. It allows you to access all the features of Monzo and Monzo Plus, in addition to new features like the ability to earn favourable interest rates (up to 1.5% annually) on your money, as well as perks like discounted airport lounge access.
How will an online budgeting tool help me save money?
Working out a budget is easy. All you have to do is note down all the money you have coming in, all the money that’s going out, and calculate the difference between the two to figure out how much you can afford to spend for the month. Sticking to a budget, though? That’s the hard part.
Monzo can help. It has a number of tricks and handy features to help you budget better. First off, it breaks down your costs by category, telling you exactly how much you spend on certain things over the course of a month. If you get a shock when you discover how much of your hard earned money goes towards paying for taxis, for example, you might be more inclined to walk.
Next, it allows you to portion off your income. The Salary Sorter feature allows you to break down your salary into savings, bills, and disposable income automatically. As soon as your wages hit your bank account, they will be sorted into your preferred pots, making you less likely to mix and match.
You can divide your money into any number of pots on Monzo, from priority bills to a holiday savings fund. Don’t trust yourself not to dip into your holiday fund? Monzo lets you lock the pot until a certain date – like the week before your holiday. You’ll be able to add money to the pot as normal, but you won’t be able to withdraw any until your holiday comes around.
Finally, Monzo helps you save money with automatic saving. Many of us like the idea of saving money, but it’s much harder to actually go through the process of putting money away rather than spending it.
With automatic saving, you don’t need to think about it. Any time you make a purchase with Monzo, you can choose to round up your transactions to the nearest 10p or 50p, and send the spare change to a savings pot. This allows you to save little and often over an extended period of time, and you will barely notice the difference.