How well prepared are you to deal with an unexpected expense, such as your boiler packing in or your car needing extensive repairs?
Worryingly, an awful lot of us have very little set aside in savings at all, which could help on those occasions when life throws a spanner into the works.
A study by YouGov and Lloyds Bank last year suggested that 7% of Brits don’t have a penny in savings, while around a fifth would only be able to get by for a month on their savings should they lose their job.
A third of those polled (30%) said they don’t save regularly, which is clearly part of the problem.
Nationwide has launched a ‘Start to Save’ account to help push people with even small amounts of disposable cash to start putting some aside on a regular basis by offering them the chance to win £100.
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How Start to Save works
On the face of it, the account is pretty simple. Savers can put up to £100 a month into their Start to Save account, which pays a modest 1% rate of interest.
It’s an instant access regular saver, so you can get your hands on the money in there at any point.
It’s also extremely easy to open ‒ you can start it with a balance of just 1p.
You’ve got to be in it to win it
Obviously, the attraction of the account really is the potential to win a cash prize, but your odds of winning will vary depending on how popular the account proves to be.
Nationwide will hold four prize draws, with the first taking place in July this year.
To be eligible, you need to increase your balance in your Start to Save account by a minimum of £50 in each of the three months leading up to the prize draw.
So, for that first draw, you’ll need to increase your balance by at least £50 in April, May and June.
The overall prize fund is worth 1% of the total balance increase across all of the qualifying Start to Save accounts over that three-month period.
So, let’s say that across all of the accounts, the balances increase by £50,000 over that three-month time period. That means a total prize fund of £500, so there will be five winners.
But if the accounts prove far more popular, to the point that the balances increase by £500,000 over the quarter, then there will be a total prize fund of £5,000, meaning there will be 50 winners.
You can withdraw money from your account at any time, but this will impact your chances of qualifying for the draw.
For example, let’s say you initially paid in £100 for the month but then took out £30 ‒ you’ve still paid in more than £50 for the month, so you qualify.
But if you took out £60, you’d need to top up the balance by another £10 by the end of the month to stay in the running.
It’s also worth noting that Start to Save won’t be available in Northern Ireland, as prize draws are regulated differently there. Nationwide said it is looking at other ways to boost savings habits there.
The ultimate guide to savings: regular savings accounts, ISAs and more
Getting into a regular savings habit
Regular savers are a type of savings account that really help people get used to saving money each month.
In exchange for handing over a certain amount of cash ‒ generally up to around £250 per month, every month ‒ savers then enjoy a beefier rate of interest than what they can expect from other savings accounts.
Not that long ago, there was a host of accounts paying 5% or even more, but at the time of writing, the top rate is 2.75% from HSBC, first direct and M&S Bank.
The slight catch is that in order to qualify for these accounts, you’ll need to have a current account with one of these banks first.
Regular savers only tend to last for a year, before the money is moved into an easy access account with the bank, allowing you to either withdraw it or move it into a different savings deal.
While Start to Save doesn’t pay such an eye-catching amount of interest, the potential to bag a £100 cash prize means that (for the winners), the return will be much greater than if they’d gone with a rival account paying a larger rate of interest.
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Will it take off?
Clearly, the success of Start to Save is reliant on lots of savers opening an account. If it proves hugely successful, and a million people who currently don’t really save go for it, then it’s a winner all round.
Not only will it have given a huge number of people a helping hand towards saving, but the chances of winning a nice cash prize will also be far better for those with the account.
Of course, it’s entirely possible that it doesn’t take off to that extent. An interest rate of 1% and a cash prize that is, let’s be honest, on the modest side may not be enough to grab the interest of those that the account is aimed at.
Only time will tell if it succeeds in encouraging more people to become savers.
Save some money, win a prize
Offering people the chance to win a prize in exchange for saving some money is not a new idea.
Halifax, for example, offers a savers prize draw, open to people with at least £5,000 of savings in total across their Halifax (and some Bank of Scotland) products.
Each month, there are around 1,600 winners ‒ three pocket £100,000, 100 win £1,000 and £1,500 get £100.
Obviously, this is a scheme aimed at rather different savers to the Nationwide draw, but the much more substantial prizes are going to turn more heads too.
And then there are Premium Bonds, the nation’s most popular savings accounts. They pay no interest, but bond holders are entered into a monthly draw, with two lucky winners walking away with £1 million.
Check out our guide to everything you need to know about Premium Bonds.