Is the Monzo 1p savings challenge worth trying?

Monzo has launched a new feature on its banking app that slowly builds a nest egg for customers each day, starting with a penny.

The 1p savings challenge works by gradually increasing the amount you put away over the course of a year. The idea is nothing new, but the digital provider claims it's the first time a UK bank has automated the savings hack.

Read on to find out more about what the challenge involves and other easy ways to save.

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What is the 1p savings challenge?

The 1p savings challenge can help kickstart a savings habit and involves putting away just 1p on the first day, then adding another penny to what you save each day. So, day two is 2p, day three is 3p, and so on. It means if you started on 1 January, the total amount saved by 31 December would be £667.95. 

Savers usually begin on New Year's Day, but you can begin on another date by paying in the total sum for the days you've missed on your start date. For example, if you joined in on 9 January, you could put 45p in your pot, then save 10p the following day.

• Find out more: best savings account

What is Monzo offering?

The 1p savings challenge sounds simple enough, and there's nothing stopping you from doing it manually. But where do you stash the cash each day? 

You could put physical cash in a jar or piggy bank, but that pot would start getting full fast and it's not very secure. 

A savings account is the obvious solution, but that requires you to log in to your current account every day and make the transfer yourself. That could soon become tiresome and you might be tempted to give up as a result. Plus, many savings accounts won’t allow you to deposit such a small amount of money.

Monzo's new feature promises to solve these problems by automatically moving the money from customers' personal or joint accounts into a 'Challenge Pot', with no manual effort required. 

The 1p savings challenge tool is open to both new and existing customers. It lasts for 365 days from the day you save your first penny, but you'll need to sign up by 31 January 2025. You can withdraw your savings, or pause or stop your challenge, at any time.

The tool also offers a few other perks:

• Customers who complete the whole challenge will be entered into a prize draw, with the chance to win £10,000. 
• Challenge participants who pay a monthly fee to hold a Monzo Extra, Perks, or Max current account could win extra cash prizes. A total of 10 £100 prizes will be up for grabs each month between February 2025 and January 2026.
• Monzo Extra, Perks, or Max customers will also earn interest on money saved during the challenge. The rate currently stands at 4.1% AER, though this is variable and the bank could change it at any point. 

Unfortunately, customers with current accounts that are free to open won't earn any interest on their challenge savings.

• Find out more: best banks and bank accounts

5 other simple savings hacks

If the 1p savings challenge isn't right for you, here are a few other techniques you could try yourself:

1. The 365-day challenge

This is very similar to the 1p savings challenge but instead of starting with a penny you put aside £1 on Monday, £2 on Tuesday, £3 on Wednesday and so on, all the way up to saving £7 on Sunday. When Monday comes around again, you rinse and repeat, restarting the process at £1.

This gives you a weekly total of £28 and an annual savings pot of £1,456, plus any interest you might earn in a savings account.

2. The 52-week challenge

As the name suggests, this is a savings challenge that involves tucking money away weekly rather than daily. 

The twist is that the amount you save must match the week number in the year. For example, in week one you save £1 and by week 52, you save £52. By the end of the challenge you’ll have built up a savings pot of £1,378, plus any savings interest you might earn.

Find out more: how to budget

3. 'No-spend' month

If you overspent during the festive period, you could try going cold turkey with your purchases for a month. This means only buying essential items and putting any money you might have used on a few luxuries into a high-interest savings account.

4. The 30-day rule

This is a variation on the 'no-spend month' challenge. It involves waiting 30 days before purchasing anything non-essential. After that, if you still want it, then you can consider buying it. This helps you to differentiate between wants and needs and avoids impulse spending. Again, money saved as a result can be invested in a savings account.

Find out more: best bank accounts for cashback

5. Round-up spending

Many banks offer a feature that automatically rounds up your debit card or contactless payments to the nearest pound and sends the spare change to your savings account. 

For example, if you purchase something that costs £19.30, then it'll be rounded up to £20, with 70p put aside in savings. It may not sound like much but if you’re doing this for every transaction it can really start to add up.