A budget shouldn’t be all about bills, saving, and saying ‘no’. Money is also meant to be enjoyed, shared, and used to celebrate the people and moments that matter. That’s where a ‘1% fund’ comes in.

The ‘1% fund’ is a savings account closely related to its sister savings account the ‘personal allowance’, but it is used for an entirely different purpose. A personal allowance is money you can spend for fun, however you choose, without needing permission or agreement from someone else. Think of it this way: your personal allowance is about autonomy; your 1% fund is about your values. Both give your budget some breathing room, but they serve different purposes.

The 1% savings fund has a different purpose. The basic idea is to set aside 1% of your take-home pay for the unexpected opportunities to help others. Maybe there’s a fundraiser you want to support. Perhaps a friend got a new job, and you want to take them out for a celebratory treat. Have you ever wanted to bring someone flowers, buy the drink for the person in line behind you in the drive through, or simply donate to a cause that’s important to you?

How to set up your 1% fund

So how do we set this up? First, create a separate savings account so the funds are easy to track and don’t get absorbed into other parts of your budget. Then, set up an automatic deposit of 1% of your take-home pay into this account. You can choose to spend this money or save it. But the rule is that you don’t borrow against future months, as that defeats the purpose of the fund.

And why 1%? Because for many people, 1% of their take-home pay is small enough that they don’t really miss it, but over time, it can create meaningful opportunities to use money in ways that align with your values and matter most to you.

The beauty of the 1% fund is that it’s already in the budget.

Now that you’ve automated your payment to your 1% savings account, you don’t have to feel guilty about using it. You also don’t have to take money away from other savings goals or priorities. You’ve intentionally created room for generosity, celebration, and spontaneous moments. The percentage-based format is helpful because when your income increases or decreases, the contribution you make to your 1% fund adjusts with it.

Sometimes the best use of our money isn’t something we planned months in advance. Sometimes it’s the fundraiser that matters to someone we love. It’s celebration we didn’t see coming, or the opportunity to make someone’s day a little better. We want our budget to be prepared for those moments, too.

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