Setting up the transfer

This chapter is the practical centre of the book. It describes a single piece of administration that takes about twenty minutes. You do it once, and after that it needs no effort from you.

Open the pot. If you don't already have a separate savings account, open one. For the cushion, it needs to let you withdraw without notice or penalty, because emergencies don't book ahead. Following chapter 8, it's better if it's with a different provider from your current account, or at least not visible on the same screen as your spending money. It shouldn't have a card. I'm not going to recommend a provider or a type of account. Whatever you choose, check that your money is protected by the Financial Services Compensation Scheme and what the current limit is. The FSCS website explains both.

Name it. Call it "Emergencies", "Cushion" or something similar.

Choose the amount. Be unambitious, as chapter 6 advised. Choose a figure that you're confident you won't need to fetch back. For some people that's twenty-five pounds and for others it's two hundred. If you're unsure, take the figure you first thought of and halve it. The commonest way this method fails is a transfer set too high. The money has to be clawed back in week three, and the person concludes that it doesn't work.

Choose the day. The transfer should leave on payday, or the day after if you'd like to be sure that your pay has landed. Don't pick the fifth because it's a round number, or "early in the month". It should leave before you've begun to think of the money as yours to spend. If your payday moves, as it does for people paid on the last working day, set the standing order for the day after the latest date it could fall.

Set up the standing order. Do it in your banking app or online, from your current account to the pot, for a fixed amount, monthly, with no end date. It takes a few minutes. A standing order is an instruction you give your bank, and you can change or cancel it whenever you like. Some employers will split your pay between two accounts if you ask, which is better still, since the money never appears in your current account at all.

If you're paid weekly or fortnightly. Do the same on that rhythm. You'd set up a smaller transfer on each payday.

If there's a backlog of good intentions. You may feel you ought to begin with a lump sum to make up for lost time. There's no need. If you have spare money now, by all means move it across. What matters is the monthly transfer, though, and you don't need to have atoned for anything before you set it up.

Then line up your other fixed payments. This is optional and it's useful. If your rent, bills and subscriptions leave the account at various points in the month, your balance doesn't tell you much until the last of them has gone. Many suppliers will let you move a direct debit date. If most of your fixed costs leave within a few days of payday, then from about the fifth the balance you see is what you really have to live on. That helps with the next chapter.

That's the whole of the setting up. I suggest doing it today, or on your next payday at the latest. It's a small job, and small jobs that can be done at any time tend not to get done. If it would help to have company while you do it, ask someone to sit with you.

Here's what to expect on the first payday. Your pay arrives and the transfer leaves. You look at the balance and it's lower than you're used to, and you feel a small pang. That's the unpleasantness the leftover plan was sparing you, and you'll find it's minor. It passes in about a day. It gets fainter each month, and after three or four months you'll have stopped noticing the transfer at all, as you stopped noticing your pension contribution.