You can do this by setting up separate bank accounts or by using a bank that lets you divide your money into ‘pots’ or ‘spaces’. You then set up standing orders to the bank accounts each month. Even if you don’t have much to spare, even small amounts count.

It may be that right now you need 95% of your income for basic living and the other 5% can be divided between the other accounts. It might be that you can spare a lot more for the other accounts. It is all down to personal circumstance.

So here are the 6 bank accounts you need….

1. Daily living

This is the bank account you already have. This is were your wage or other earnings are paid into. Work out exactly what you need to keep in here each month and split the rest between the other accounts.

2. Longer-term savings

This should be for a specific goal such as a deposit on an investment property. Saving in a bank will reduce your spending power over time due to inflation; so use the money for an income generating purpose as soon as you can!

3. Investing

This is for day-to-day investing. Maybe you see an opportunity to by some Bitcoin at a good price on a particular day or some other irresistible opportunity comes up. This money is set aside for that purpose. You can use it as needed without worrying that you are spending your daily living currency.

4. Business/Education

This one is for spending on building up side hustles – start up costs, marketing, etc. It is also for spending on courses, books and other educational materials which will increase your income in the future.

5. Animal Charities

Doing good gives life meaning. Animals are innocent and unable to stand up for themselves. There are very few people helping animals compared to other causes, so it is an area that you can do the most good. Unlike many other charitable sectors that have unintended ill effects, as long as you pick a good animal charity you can be assured you are improving lives. So while it is, of course, your decision I highly recommend giving something to animal charities each month!

6. Emergency

This is your rainy day fund. Life is never certain and things often don’t go to plan. Putting aside some money each month into an emergency pot ensures you are secure if disaster strikes. Having this fund means you will not have to rely on credit cards or expensive payday loans. This is a huge saving in the long run.

Give these bank accounts a try even if you can’t put much into each right now. Over time it will become a habit and as you earn more you can adjust the percentage you put into each.

You can check out Measuring Worth for a cool (scary) calculator that shows you how currency loses value over time.

The good news is there are ways to get inflation beating interest rates. Each method has it’s pros and cons and we will look at 3 of the best options.

#1. Cryptocurrency Lending

Don’t worry, you don’t have to buy any Bitcoin for this one. There are companies that lend out cash to businesses secured by their cryptocurrency holdings. They require fiat currency (pounds, dollars, etc) to lend out to these businesses. If you lend these businesses your cash you can earn 8% on your money. A company called Nexo will accept your Pounds and Euros, while Blockfi will accept your dollars.

If you are interested in cryptocurrency at all then the good thing about Blockfi is they offer the option to have your interest paid in Bitcoin or Ether! This is a great way to get your feet wet in crypto without having to buy any directly.

The potential risks with this method is the fact that unlike a bank your money is not backed by deposit protection schemes. Do your research into any company you invest with and understand their risk management strategies to keep your money safe.

#2. Peer-To-Peer Lending

Peer-to-peer lending is where you loan money to businesses seeking finance. There are a number of platforms in the UK that you can use to lend out your cash. It is possible to earn around 8-10% on your money with this option. Most platforms require you to select which loans to fund and in what amounts (though there are automated options as well).

The potential risk with this option is that the businesses default on their loans. You can mitigate this by diversifying the businesses you lend to and ensuring you only lend a small portion of your savings to each. You should also remember that it is not usually possible to withdraw your capital during the term of the loan so make sure to only invest your long-term savings.

#3. Lending To Property Investors

If you have savings of £100,000 or more you could consider lending to a property investor. Often, investors need cash to purchase properties that they will refurbish and refinance. You can lend at 8-12% (or sometimes more) and have your loan secured against the property. The investor will normally refinance the property in 6-18 months and return your interest and capital. If they can’t refinance for any reason they will keep paying you the agreed interest rate until they can pay back your capital.

The potential risk with this method is that the investor defaults on the loan. You can mitigate the risk by securing the loan against the property and ensuring the loan-to-value (the amount you lend compared to the market value of the property) isn’t too high.

Remember...

Always do your research before parting with your cash. Be careful and understand the risks associated with any investment.