Thursday Treat Time: Starting a treats fund

As you may already know, I’m a big fan of having the occasional treat and am looking forward to writing about them more regularly from now on. This site’s going to be linking up with Work from Home Wisdom, an excellent source of all kinds of useful information for people who run their businesses from home, run by the lovely Judy Heminsley, to bring you even more treats.

This week I’ve been looking into starting up a new ‘treats fund’ so that I can save up for the occasional little luxury, or just buy myself a tiny something nice here and there that’s guilt free. It’s simple enough to budget a small amount of pocket money for yourself if you have regular wages coming in, and I’ve also come up with a fairly painless way for doing this with freelance income.

How to pay yourself ‘grown-up pocket money’

If you’re very organised with your finances then you could simply keep this money in your current account once you’ve allocated it. Unfortunately I’m one of those people who finds it difficult to keep different bits of money separate, and instead of having a treat it seems to go on very non-lovely stuff like, say, paying the gas bill or buying multi-packs of toilet roll when they’re on special offer.

Another option is to work in cash, taking the money out shortly after payday and keeping it in a safe place. That’s fine if you plan your spending best with cash, and you’re planning on using it all up in a fairly short space of time. This wasn’t the best option for me right now, because I’m hoping to do a mixture of short term spending and medium term saving up.

So I’ve decided to open a new savings account just for treats. The idea is to:

• Stop my treats money being subsumed into boring everyday household spending, and keep it completely separate from other funds
• Earn a little interest if I decide to save up a bit from one month to the next

I’ve deliberately chosen not to put this in an ISA/NISA account because you can only open one each year, and I want to use that particular option for more serious savings purposes with longer term plans.

Next, I had a think about what else I wanted from the treats account, and decided it should be:

• Instant access for entertainment and bargains
• Something that could be opened with £10 or less
• Internet banking so I can transfer funds in and out whenever required
• With an ATM card for quick cash

That means I can start small, build savings up if required, and get cash easily if I decide to use my pocket money on a night out. I’ll also have the option of making bigger online purchases using my credit card, and then be able to pay off the card immediately via internet transfer before interest charges are incurred.

Unfortunately, generally speaking, the more convenience and flexibility you require from a savings account, the lower the interest rate it tends to pay. In particular, wanting an ATM card has limited the number of options, but there are a few available and it’s still slightly better than keeping the money on the mantelpiece in an envelope. Harder to steal as well.

What did I find for my Treats Only account?

The best deal I’ve been able to track down that ticks all the particular boxes is the Yorkshire Building Society Internet Saver Issue 3 account, which comes with an optional cash card if you request one. It pays 1.25% gross interest per annum, and at least that’s a standard rate rather than an introductory one that will soon drop.

Please note that this does not imply a general endorsement of this account. In fact, I’d go as far as to say it’s the best of a bad bunch, but it fits my purposes at this moment in time and it’s better than nothing. If you’re looking for a savings account too, remember to carry out your own research – you will be able to find better rates if you don’t want a cash card, for example.

Do you have a separate account for treats or pocket money, or do you prefer to work in cash? What would you say is the best option when budgeting for nice but non-essential things?

[box type=”alert” style=”rounded” border=”full” icon=”none”]Don’t forget to visit Work from Home Wisdom too, where Judy’s interviewing Parissa Janaraghi – founder of the Movie Quotes & More blog – about what treats mean to her and how they help to improve productivity.

*Come back and join both of us next week for another Thursday Treat Time!*[/box]