Saving with the Help to Save Scheme

We are all told from a relatively young age that we should try and save money, but little information is provided on how, and even doing your own thorough research can still leave some helpful tips in the dark. Saving is tricky and it takes a long time to form sustainable financial habits and build a reasonable fund for rainy days and emergency expenses. This, together with a low income or a small disposable budget, can make saving any money seem almost impossible and somewhat intimidating.

What is Help to Save?

There is a government run saving scheme aimed at people on low incomes and receiving tax credits, to encourage them to save money – even if it’s just £10 per month. The scheme is called Help to Save, and instead of earning interest on the money you put away, you earn a bonus. If you are eligible, you can save anything between £1 and £50 per month for up to four years, and you will receive a bonus at the end of the second and fourth years.

What are the benefits of Help to Save?

There are plenty of benefits to having savings, and the Help to Save scheme makes saving more accessible. One of the main features which makes the low income savings account useful is that you can withdraw the saved funds at any time, without paying a penalty charge. As budgeting on a low income is tricky enough, it can be a comfort to know that the money you are putting into savings remains accessible.

The bonuses are a big incentive to use Help to Save, but they work a little differently than you might think. Instead of earning a flat interest rate, the bonus is calculated as 50% of the highest amount you have saved over each 2 year segment. For example, if you saved £500 in the first year, then withdrew some money throughout the second year, you would earn a bonus of £250 – even if your balance at the end of the 2 year period is only £100. It works similarly in the second segment (years 3 and 4), but the bonus is based on the highest amount saved minus the amount saved in the first segment. It sounds confusing, but essentially, you can think of the second segment bonus as starting from a £0 balance.

The most you can save into the scheme over four years is £2400, which is a maximum amount of £50 per month, multiplied by 48 months, and the highest total bonus you can earn over the four years is £1200. So, you could save over three and half thousand pounds, which would typically cover almost any emergency expense, and can go some way to creating financial stability on a low income.

Are there any disadvantages to Help to Save?

There are no real disadvantages to this scheme, because it maximises your savings, even if you don’t have much to save. The only things to be aware of are that while you can withdraw from your savings account without any penalties, it will make it harder to reach a high balance for the bonus calculation. Of course, sometimes emergencies arise and you need the cash to meet a bill, but try to limit how often you dip into the Help to Save account and how much you withdraw. This will increase the amount you can earn in bonuses at the end of the four year period.

Another thing to note is that the maximum you can pay into the account each month is £50, even if the month before you only put away a fiver. If possible, it might be a good idea to put a little extra cash into a separate savings account in better months, so that you can still pay something towards your Help to Save in worse months. It might take a bit of organisation and money management, but the rewards would definitely be worth it.

Help to Save Eligibility

The Help to Save account is specifically designed for people on low budgets and the criteria means you can only open an account if you live in the UK and you’re any of the following:

• receiving working tax credit
• entitled to working tax credit and receiving child tax credit
• claiming universal credit and you earned at least £604.56 from paid work in your last monthly assessment period

You can find out more about the criteria and how the Help to Save account affects your benefits on the government webpage.

Alternative Saving Tips

Of course, this isn’t the only way to save on a budget, but it is a good starting point to build the foundations of a successful savings account. Not only will you earn more on your savings than almost any other savings account, but the money remains accessible and the scheme helps you develop a sustainable habit of putting regular amounts of cash away each month.

If you’re looking for other ideas to learn how to save, we have a wealth of information in the blog section on our website. But as some quickfire tips that you can implement into everyday life, why not try:

• Saving your coins – 2p, 10p or £1, whatever the amount, put it into a jar or piggy bank at the end of each day and watch your pennies turn into pounds.
• Track your invisible spending – the money you don’t realise you spend can add up quickly! Being aware of it can help reduce invisible expenditure and lead you to create a more realistic budget.
• Transfer your savings once you get paid – it can be common practice to transfer any leftover money into a savings account at the end of the month, but you’ll probably save more if you work out a budget and transfer the funds you’ve allocated to savings as soon as you get paid (out of sight, out of mind can really help some people avoid temptation and save more!)

Building up savings is a long-term goal which takes daily action to achieve. It can be disheartening when you work hard and have little saved to show for it, but over time and with persistence, your savings will grow into a financial security blanket and you might just be able to treat yourself from time to time as well.