Squirrel – a clever approach to budgeting

Do you have money problems because you get paid at different times to when your bills need paying? Or does your pay burn a hole in your pocket so you can’t save?

Here are some typical things I hear:

• “I get paid every 4 weeks and it’s hard to make sure money is in the account when monthly direct debits come out”;
• “We spend too much at the start of the month and have nothing left for the last few days”;
• “A lot of our money is from benefits paid every fortnight. I try to put money aside for monthly bills but then I think Oh I will just take a tenner from that  so it doesn’t work”;
• “If I save when I get paid, I run out of money. But if I wait until the end of the month, there is never much left.”

If this sounds familiar, look at the Squirrel app, which helps people budget better and save more. It works on any mobile, laptop or desktop and has 20,000 users.

How does Squirrel work?

Setting it up

First you tell Squirrel how often you get paid and what all your regular bills are. These could be rent/mortgage, council tax, mobile bills, loan repayments, insurances, charity donations, anything.

You also tell Squirrel how much you would like to save for specific goals – a replacement car? house deposit? Christmas? Squirrel encourages you to also put aside some money for a rainy day fund and for unexpected bills.

A Squirrel account is opened for you. This is an account in your name which is run by Squirrel. It is held at Barclays Bank but you aren’t credit checked for this so it won’t be rejected.

You get your pay and benefits paid into your new  Squirrel account. But you keep your current bank account with all the direct debits and standing orders in it – you don’t have to switch bank accounts.

How Squirrel moves your money

Squirrel works out how much is needed for your regular bills and planned savings and then it keeps this in your Squirrel account until it is needed, so you can’t spend it by accident.

For example, if you are paid weekly and the rent is due in three weeks time, it will keep back some money from this week’s pay for the rent, but not all of it as it knows you will be getting paid twice more before the rent is paid.

When a bill is due, Squirrel transfers the money back to your main account the day before, so you never miss a payment.

Get your spending money immediately or in weekly chunks

You have two options for your “spending money”, the income that isn’t needed for bills and savings:

1. Squirrel can move it straight back to your normal account so it is there for you to spend how you want, when you want; or
2. Squirrel can divide up the money into weekly portions and give you a week’s money at a time.

If you find having a lot of money in your account means that you spend too much early in the month, the weekly option could work well for you.

Squirrel says that people who choose the weekly option are much more successful in meeting their savings goals than people who don’t.

You can change what is planned

At any time the app shows your current position and what will be happening soon. You can see how much you have saved towards your different goals and what will be paid in the next few weeks etc.

And, of course, you can change things: take money out of a savings goal, decide you want some more money this week, add a new bill etc.

What if there isn’t enough money?

If there isn’t enough money for all of your bills, savings goals and to live on, then something has to give!

Perhaps you just have a temporary shortfall this month and taking some money out of savings will get you through. Squirrel can help smooth out erratic incomes by making it easier for you to save in the good weeks/months. If you find yourself doing this every week, then your savings goals may be too optimistic.

If using your savings pots isn’t enough, then Squirrel tries to prioritise. It sees rent/mortgage as your top priority, followed by council tax and utility bills.  You can always see in the app how much money there is and what bills are coming up.

But if your problem is that your income isn’t enough for all your bills, debts and living expenses, then you need debt advice.  Read A roadmap of debt solutions to get an overview of your options – that has links so you can explore them in more detail.

If you get a debt solution such as a DMP or an IVA set up, where you have to make monthly payments, Squirrel can then be a good option for you to help budget for those payments.

Squirrel costs £9.99 a month after the first 2 months. Ouch – but worth it?

I almost never recommend that people with money problems pay for advice or apps to help them budget.

But Squirrel really can be a life-changer. If it works for you, it can save you time, avoid stress, reduce overdraft charges and lead to you saving money regularly, at a small cost.

Here are some users talking about it:

Squirrel User Testimonials from Squirrel on Vimeo.

You could do all this yourself for no charge.

• Your grandparents used pencil and paper.
• Your parents may have used a spreadsheet.
• Some of your friends may be happy with apps that just show where all their spending is going.
• Piggy banking – also known as the envelope system, but you don’t actually have to use cash in envelopes! – can work brilliantly for many people.

Any of those options could work for you… but if you have always failed before at your attempts to budget better, then trying Squirrel is a good idea.

If after the first free months you don’t think it’s helping, it’s easy to stop using Squirrel. Just switch your income back to your normal account and carry on as before.

Find out more

If you have any questions, look at Squirrel’s FAQ page, or you can call their support helpline. For example, if you are a student who gets a grant three times a year, or a couple with a joint account,  Squirrel have suggestions about how to make the app work for you.

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