Nationwide has launched a new savings account that offers £100 prizes to savers who put away at least £50 a month.
Start to Save is designed for people who have ‘fallen out of a savings habit or struggle to save on a regular basis’.
It allows deposits of up to £100 a month and offers an interest rate of 1% AER.
Here, we explain how Start to Save will work and offers advice on how you can make your savings grow.
Nationwide launches Start to Save account
Nationwide has today launched Start to Save – an instant-access regular savings account that pays 1% interest on balances.
Its main selling point is that savers who deposit at least £50 a month for three months will be entered into a quarterly draw, in which they can win a £100 prize.
Nationwide says the account is designed to encourage young people and families to save, even if it’s in small amounts.
The account isn’t suitable for those looking to save bigger sums, as the maximum deposit limit each month is £100.
Tom Riley, director of savings at Nationwide, says: ‘Start to Save is aimed at those struggling to build a savings buffer of any sort.
‘Even without the prize draw, £50 per month saved over the two-year period would be a good financial buffer to fall back on.’
- Find out more: the different types of savings account
What are your chances of winning £100?
To be eligible for a £100 prize, savers need to increase their balance by at least £50 a month in each of the three calendar months leading up to the prize draw.
The prize fund will vary from draw-to-draw. It will be calculated at 1% of the total balance increases of all Start to Save accounts since the previous draw.
Nationwide says that if 50,000 savers deposit £50 each month between April and June (£150 in total), the prize fund for July’s draw will be £75,000 – resulting in 750 savers winning £100 each.
If all savers add the maximum of £100 each month (£300 in total), the fund would be worth £150,000, meaning 1,500 savers would win a £100 prize.
Start to Save: the small print
Start to Save accounts are available from today on Nationwide’s website and through its internet banking app.
Accounts can be opened with as little as a 1p deposit and are available in England, Wales and Scotland.
Nationwide says it’s looking at alternative options in Northern Ireland, as the account would break its rules around prize draws.
The prize draws will be held on a quarterly basis on the following dates:
- 21 July 2020
- 21 October 2020
- 22 January 2021
- 23 April 2021
How much interest will you earn?
The Start to Save account will only operate for two years, after which savers will be reverted to Nationwide’s Instant Access Saver. That product currently pays just 0.1% interest on balances less than £10,000.
If you save the maximum of £100 a month into a Start to Save account (£2,400), by the end of the two years your balance will stand at £2,423 – meaning you’ll have gained £24 in interest.
By way of comparison, you’ll only make a paltry £2.30 if you save £100 a month for two years in the Instant Access Saver.
Alternatives to Start to Save
Nationwide says its new account complements other available initiatives, such as Help to Save and PrizeSaver.
Help to Save
The government’s Help to Save initiative is a savings account available to people who are eligible for Working Tax Credit or Universal Credit.
It offers a bonus of 50p for every £1 saved over four years. The maximum you can pay in is £50 each calendar month.
PrizeSaver is available through credit unions, which offer community savings accounts for people who live or work in a specific area.
For every £1 in your account with a participating credit union (up to £200) you’ll be entered into a monthly prize draw, with one £5,000 prize and 20 £20 prizes on offer.
- Find out more: saving with a credit union
Should you consider premium bonds?
NS&I premium bonds are one of the most popular savings products in the UK.
They involve savers buying £1 bonds (from a minimum holding of £25 to a maximum of £50,000), which don’t benefit from any interest, but are entered into a monthly prize draw.
Each month, two savers have the chance to win a £1m jackpot as well as other cash prizes starting from £25.
Some 39.8m bonds were drawn out in 2019, but our analysis found that 98% of these won prizes of just £25 for their owners.
From May this year, the odds of each individual bond winning a prize in any given draw will increase from 24,500 to 1 to 26,000 to 1.
- Find out more: are premium bonds worth it?
Should you use Start to Save?
Start to Save has been welcomed by the Money and Pensions service, which says it’s ‘exciting to see innovative new products’ for people struggling to save.
The account could be an excellent option for those who can squirrel away some money each month, as they will be able to quickly withdraw funds if required.
The potential £100 bonus could also encourage people to stick at saving.
Those looking to save larger amounts may be better looking elsewhere, as the £100 a month maximum and 1% rate may be limiting.
Right now, it’s possible to get an easy-access savings account with a rate of 1.35%.
- Find out more: compare savings rates on Which? Money Compare
Advice on saving money
If you’re looking to save money in 2020, we’re here to help.