Monzo customers collectively stashed away £80million in rounded up spare change last year as the smartphone bank’s millennial user base got in on the nation’s saving habit.
The amount saved by a fifth of its customers this way, around £80 each, rose a third on the £60million saved in 2019, according to figures provided exclusively to This is Money by the bank.
It comes as Monzo, best-known for its enthusiastic customer base and hot coral coloured debit cards, releases its third annual ‘Year in Monzo’, which gives its nearly 5million users a snapshot of where they spent the most money.
The smartphone bank is releasing its third annual year in Monzo which tells customers where they spent the most money in 2020
The feature first launched in January 2019, covering spending in 2018, and frequently sees Monzo customers post their results on social media.
But the figures provided to This is Money also suggested its customers were equally as keen on saving as spending, especially given last year saw the country stuck inside and unable to spend on in-person activities during two coronavirus lockdowns.
Customers of the app-based bank saved into 5million ‘pots’ in 2020, which let users separate out money from their main bank account, half of which were created with specific ‘goals’ in mind.
These included rainy day funds and saving toward weddings, holidays and house deposits, while a Facebook group detailing the habits of some customers, the ‘Monzo Saving Squad’, has more than 14,000 members in it.
Customers of the bank who spoke to This is Money told us how the bank’s budgeting features had helped them clear £20,000 of debt and afford a house, stop spending money they didn’t have and finally save enough money to pay their car insurance bill in one go without needing a credit card.
I cleared £20,000 in debt and saved for a home
Roberto Dias , 24, credited Monzo’s budgeting features with helping him clear £20,000 of debt, get in the habit of saving and obtain a mortgage.
Roberto, from Boston, Lincolnshire, who works for Domino’s Pizza, said he was able to kick his reliance on credit cards and payday loans by tightening his belt and limiting himself to £30 a week and locking his money away in savings pots that he couldn’t touch.
Roberto Dias, 24, was able to pay off £20,000 in debt and afford a home with his partner by limiting himself to spending £30 a week
‘I used to finance everything’, he said. A customer of Monzo for five years who now pays for the bank’s £15-a-month metal debit card, Roberto said he would set up pots for each of the debts he owed and pay them off one at a time, focusing on the largest first.
And he also incentivised himself to save up for a house with his partner, which he bought in April last year, by using a picture of the one he had his eyes on.
‘I have a few different pots, for bills, for my house deposit, for my joint account with my partner, you can use photos and give them titles which gives you a goal’, he said.
Roberto used a picture of the house he and his partner wanted to buy as the image on his savings pot, which he said incentivised him to keep saving
‘To start with I’d dip into the pots when I shouldn’t have, but you just get used to it’, he said, telling This is Money he now ‘hides’ some of the pots he has so he can’t see them and isn’t tempted to touch them.
He said he’s currently saving up for a holiday and to do up his new home, and potentially to overpay his mortgage.
Monzo’s pots, which can be locked or hidden from view to discourage customers from dipping in, were home to some of the nearly £1.4billion of customer deposits held by the bank at the end of last February, according to its latest financial results released in July, which warned the pandemic had ‘significantly impacted’ its revenue.
Those figures suggested the bank was more popular as a budgeting tool than it was as a full current account, with £1.4billion working out at around £357 per customer at the time.
However, the increase in rounded up spare change, coupled with Britain saving record amounts of money last year, suggests this number could well have risen.
Monzo also revealed £1.2billion was saved into savings accounts customers were able to set up with partner banks, from which Monzo earns commission.
It earned £1.4million from such deals in the 12 months to February 2020, up from £100,000 the previous year.
Founder and former chief executive Tom Blomfield previously suggested this marketplace model, with customers also able to switch energy bills in its app, could eventually account for four fifths of the bank’s income.
Some of the banks Monzo has a tie-up with include Paragon Bank, Shawbrook Bank, Charter Savings Bank, Investec Bank and Oaknorth.
However, those Monzo customers who have stashed away that £1.2billion can earn more by going to the banks directly, as This is Money has previously reported.
The best and currently the only easy-access account available through Monzo’s savings pots is offered by Paragon Bank and pays 0.15 per cent, but the bank offers 0.25 per cent to savers if they go directly, with a tax-free Isa also available paying the same rate.
And the best fixed-rate is offered by Charter Savings Bank, paying 0.45 per cent.
However, savers can earn 0.61 per cent on a one-year fixed-rate Isa by going to the bank itself, while it also offers an easy-access account paying just 0.05 percentage points less.
I managed to save £1,000 in 2020 for emergencies
Jade Hilder saved up £1,000 into an emergency fund after worrying about whether she could financially support her family
Tesco employee Jade Hilder credited going ‘fully Monzo’ and joining the popular ‘Monzo Savings Squad’ Facebook group for helping her develop a savings habit, having previously had ‘no idea about money’ and spent money she didn’t have.
The 24-year-old, from Buckingham, Buckinghamshire, has six or seven savings pots which she uses for things like bills and car costs, so that she now always knows what she has to spend.
‘I use them for all kinds of things’, she told This is Money, ‘I have done two savings challenges and locked the pots and made myself not touch the money’.
And concerned about supporting furloughed family members as the only one in work, she celebrated hitting the milestone of putting £1,000 in savings into an emergency fund.
‘It was hard at first, she admitted, it’s so difficult to get that amount of money.’
Meanwhile, Rachel Jobes, from Newcastle, had never paid her annual car insurance bill in one go without the help of a credit card before attempting the 1p savings challenge and stashing away spare change.
The challenge sees savers start saving 1p on 1 January and increasing that every day, so £3.65 is put away by the end of the year, and is a popular one among Monzo’s customers, according to a Facebook group with more than 14,000 members.
Rachel Jobes paid her car insurance bill in one go after successfully completing a savings challenge
Coupled with rounding up her spare change, which she does ‘all the time’, meant Rachel, who works in leadership and management training, was able to accumulate more than £650 by the end of the year, enough to cover her premium.
‘At first the saving was quite unusual, I did have to hide the pots as you think what else could I spend the money on’, she said.
The 41-year-old switched her main current account over to Monzo in September 2019 having previously had two bank accounts, and said the ability to separate out the money she spent on bills was the main reason why.
Having ‘got a lot better with money’, Rachel said she would usually end up with £17 to £20 at the end of each month from rounding up her spare change, which she would save and hide away if she didn’t need to spend it on something like petrol, something she would also do if her bills were cheaper than expected.
She also keeps a pot titled ‘generosity’, which she said was generally home to money used to buy coffees for her friends.
‘It’s now almost a game’, she said, ‘it makes you manage money a lot better’.
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