How N26 Helped Me Save a lot of Money

Introduction

For many years, I was earning sufficient amount of money to live well. However, at the end of each month, I always struggled to figure out where my money went. I hadn’t thought about saving at all until 2018, just before my marriage. When I decided to get married, I did not have enough savings to cover the expenses. So I had to borrow a large chunk of money from my friends and family. That was the time I realized the importance of saving money. For all the loans I took, I had to struggle and it took me more than 2 years to pay fully. During that time, I had to live a very frugal life. That was a hard but important life lesson for me.

How I Started with N26

I learned the concept of Personal Finance rather recently, just a couple of years ago. When I thought of saving I began exploring various methods, educational resources, and options to save more. Before moving to Germany, I tried different saving schemes and wanted to invest in stocks and businesses, but my options were limited in my home country.

After moving to Germany, my friend Ratul told me about N26, a digital banking company based in Berlin. He recommended it because it’s modern compared to other offerings here. I opened up an account with them to try out. But I did not use it regularly for the first year. I took a look at the different features it provides and at first it did not understand all the concepts at the beginning, e.g: N26 Spaces. This bank was pretty different from my old bank back home, so it took a while to get the hang of things.

After using N26 for some months, I understood the core concepts of its main features and have been able to save a lot of money over the last 3 years. So, I thought of sharing my experience on the internet in case it might help someone like me who wants to be better at money management!

In the following sections below, I will describe how I use N26; plus with a few personal strategy to save more and improve my personal finance.

• 📚 Separate Expense Types
• ✨ Auto Allocate Amount in Spaces
• 💸 Invest Regularly - Become Wealthy
• 💳 Virtual Cards to Separate Payments
• 🚧 Guard Rails on Activities
• 💶 Activate IBAN - Pay Bills Automatically
• 🎯 Space Goals - Achieve Peace of Mind
• 🫧 Tidy Up Main Space and Save Pennies
• 🦺 Emergency Fund - Prepare for the Worst
• 💁 Help the Less Fortunate

📚 Separate Expense Types

If you can’t see where your money is going, it’s hard to save. It’s important to know how much we are spending on different expense types. This is the first step to saving money. When we know where our money is going, we can make informed decisions on how to spend it. When we have multiple streams of spending, using only one bank account for that can be a challenging task. Rent, groceries, eating out, shopping, subscriptions, etc. and many ad-hoc expenses also come up spontaneously.

N26 provides virtual separation of your money, which they call “Spaces” in their system. This is helpful to separate expense types into different categories. For example, I created these spaces in my account:

* Bank (Main Space)
* Groceries & Food
* Shopping
* Bills & Utilities
* Investments
* Trips
* Emergency Fund
* Donations

✨ Auto Allocate Amount in Spaces

I have a traditional German bank account where I receive my monthly salary. After receiving the salary, I transfer most of the amount to my N26 account, keeping only a few Euros in the traditional account for emergencies. I have set up an automation so that upon receiving a certain amount, it is automatically sorted into different spaces based on my monthly spending needs.

For a hypothetical case, let’s imagine I transfer 4000 Euros at the beginning of each month to my N26 account. This amount is then allocated as follows:

• 500 Euros to the ‘Groceries & Food’ Space
• 300 Euros to the ‘Shopping’ Space
• 1200 Euros to the ‘Bills & Utilities’ Space
• 1200 Euros to the ‘Savings & Investment’ Space
• 300 Euros to the ‘Trips’ Space
• 30 Euros to the ‘Donations’ Space
• The remaining amount stays in the Main Space

Please note that the setup and names of spaces mentioned here are hypothetical but sane examples. Your own setup might differ based on your personal needs and priorities. The actual amounts allocated to each space can vary depending on your financial goals.

💸 Invest Regularly - Become Wealthy

You don’t want to keep your money idle in a bank account for too long.
The last thing you want is to watch your hard-earned money lose value due to inflation.

Like I mentioned earlier, I set up a dedicated space for investments. Many financial advisors recommend saving up or investing around 20-30% of your monthly income. Currently, I am able to save up to 30% of my monthly income in the investment space. I usually put money into stocks and ETFs. Investing regularly has been a great way to grow my savings. It can protect you from inflation and increase your wealth through the power of compounding. The compound effect can significantly enhance your financial growth in the long term.

By separating my investment amount from other expenses at the beginning of the month, I ensure that this money is reserved solely for investments. This approach allows me to invest confidently without the risk of spending it on other things. This helps me to keep a consistent and disciplined investment habit.

I won’t go into the specifics of my investments here, as that’s not the scope of this post. Please do your own research or consulting with a financial advisor before making any investment decisions. However, it is generally a good practice to invest a portion of your income to build wealth over time.

💳 Virtual Cards to Separate Payments

Since I have already separated my money into different spaces, managing payments becomes easier, especially with the virtual cards feature. I can create virtual cards and link them to individual spaces. For example, I have a virtual card linked to groceries and dining out, another for general shopping, and another for trips and hotel bookings.

Adding these virtual cards to Google Pay or Apple Pay makes it even more seamless to pay for things. I can easily switch between cards based on the type of purchase I am making. The nice thing about those cards, it has cool graphics and it’s easy to identify which card is for what purpose.

When paying for groceries, I use the (Simple) card linked to the ‘Groceries & Food’ space. When on a trip, I use the (Suitcase) card linked to the ‘Trips’ space, and so on. I can keep track of my expenses more effectively and ensure that I am spending within my budget for each category.

🚧 Guard Rails on Activities

I have set up a rule that if I spend more than 100 Euros on shopping, I get a notification. This way, I can control my shopping habits and avoid unnecessary expenses. Additionally, I can set daily and monthly limits on each card. For example, I can set a daily limit of 50 Euros on my groceries card. This helps me manage my daily spending and ensures that I do not exceed my budget for groceries.

Moreover, these limits can be adjusted based on my needs. If I notice that I am consistently hitting the daily limit, I can review my spending habits and make necessary adjustments. This feature is particularly useful for managing spending and ensuring that I stay within my financial goals.

These little rules help me keep my spending in check and avoid any impulsive buys. It also provides a sense of security, knowing that I have set boundaries to protect my financial well-being. This proactive approach to managing expenses helps me stay disciplined and focused on my long-term financial objectives.

💶 Activate IBAN - Pay Bills Automatically

In Germany and other European countries, many services require an IBAN to send money using SEPA direct debit. With N26 Smart subscription, one can have 10 IBANs in total in different spaces. This makes life a lot easier, because I can setup payment for my rent and utilities for one space, another space only for online shopping, another space for billing anything related to trips/hotel booking, etc.

Now I don’t have to think about sending rent to my landlord every month. They get paid automatically with the Scheduled Transfer I setup in my ‘Bills & Utilities’ space. Similarly, I setup automatic payments for my electricity, gas, and internet bills. So I don’t have to worry about missing any payments or late fees. It’s a huge relief to have this feature, and it saves me a lot of time and effort.

Another tip I can give here is to use credit-cards/rewards-cards for grocery or online shopping. I know how much I spend on groceries each month, so I can easily set a limit on the card. I can also earn cashback or rewards points on my credit card for each purchase. I generally avoid credit cards because this can lead one to bad shopping habit. But when I’m in control with the Space I setup, I can save a little extra money on every purchase I make. This also applies on shopping from Amazon with their reward cards.

🎯 Space Goals - Achieve Peace of Mind

I can set up specific savings goals for each space. For instance, if I aim to save 1500 Euros for buying a new computer, I can create a goal within my Shopping space. The app will then display a progress bar indicating how much I have saved so far and how much more is needed to reach my target.

The amount allocated to the Shopping space during the income sorting process often exceeds my monthly spending. Typically, I don’t purchase many items. For instance, if I allocate 400 Euros to the Shopping space each month but only spend 200 Euros, the remaining 200 Euros will carry over to the next month. Over time, as the balance accumulates and reaches my goal, I can confidently make larger purchases, such as buying a new computer. This approach allows me to achieve short-term goals without disrupting my financial routine.

🫧 Tidy Up Main Space and Save Pennies

N26 has a feature called Round-Ups, where it rounds up the amount to the nearest Euro and saves the rest in a space. For example, if I spend 2.75 Euros on a coffee, it will deduct 3 Euros from the main space to keep the main space tidy and save 0.25 Euros in a space. In this process, I am saving pennies to a different space without even noticing it. Also, seeing the main space without any decimals at the end just feels nice! 😄

I save this round-up amount in my ‘Trips’ space. Traveling is one of my hobbies, and my wife and I love to travel. So for us, it’s important to have enough money readily available for trips. Although I send a fixed amount to the ‘Trips’ space each month using income sorter feature, the round-up feature helps me save a little extra. Every year, we can plan at least 2 long trips with the money saved in this space. When it’s time for a trip, we don’t have to worry about managing the budget for it, as we are already saving regularly.

🦺 Emergency Fund - Prepare for the Worst

Disaster can strike at any time in life. Take the pandemic, for example. One can lose their job or suddenly face a significant medical bill. An emergency fund is a lifesaver, it’s there to handle those unexpected life events. Many financial advisors recommend having an emergency fund that can cover your expenses for at least 3-6 months. This fund acts as a financial safety net, ensuring you can maintain your standard of living without resorting to debt or selling assets. It’s essential to keep this money untouched unless you are in a genuine emergency. Therefore, it’s wise to allocate a separate space for your emergency fund and consistently contribute to it, ensuring you are always prepared for the worst.

When I learned about emergency fund, I did not have enough money to form an “emergency fund” right away. I saved up little by little over many months. But once I hit the target amount, I felt a sense of relief and security. It’s important to have some patience and discipline in the beginning. And trust that you can reach this goal over time. It’s a relieving feeling to know that you are at least financially prepared for unexpected events that may come your way.

💁 Help the Less Fortunate

The definition of being rich varies from person to person. For me, having an income that exceeds my needs/expenses makes me feel rich. For example, if I need 99 Euros to live properly, and my income is 100, I have 1 Euro at hand. Even with that 1 Euro, I consider myself rich. 🙂

When you have enough money to support yourself and your family, you can start thinking about helping those who are less fortunate. This act of giving provides a sense of satisfaction and purpose in life. I have a dedicated space for donations where I save a small amount monthly. Saving just 1-2 Euros or even a few cents each day can accumulate into a significant amount over time, making a big difference on someone’s life when you decide to donate after a few months.

💭 Final Thoughts

I have been using N26 for the last 3 years, and it has significantly improved my ability to save money. To get correct numbers for each my spaces took some time. I had to observe my spending habits for a first couple of months to understand where my money was going. Once I had a good picture of my expenses, I was able to allocate the right amount to each space. However, it changes from time to time based on my needs and priorities. It’s okay to readjust the numbers based on your current situation. I try not to be too strict with myself, but I also try to maintain a balance between spending and saving.

While some of the features mentioned above are only available with a subscription, many are accessible with a free account as well. Personally, I find the minimal monthly fee for the N26 Smart account to be well worth it for the additional features that have greatly enhanced my financial management. Getting the N26 Smart plan was one of the best financial decisions I have ever made. Please note that I am neither sponsored nor influenced by N26 or any other business to write this blogpost. I am simply sharing my personal experiences and practices that have helped me save money, and I genuinely love the bank and the features it provides.

The features I mentioned above may be available in other digital banks as well, but I haven’t tried out many of them. Choose the one that is available in your area and suits you the best. The practices I shared above can be exercised regardless of the bank you use. Of course it helps if your bank provides these features out of the box.

If you find this post helpful and decide to open an N26 account, please consider signing up using my referral link to receive a *50 Euros sign-up bonus. I will also get some commission in the process. Also, feel free to share this post with your friends and family who might benefit from it. Sharing is caring! 🫶

* Amount can vary. N26 occasionally increases the amount based on different promotions.