Back in September 2018, the government launched its Help to Save scheme. The scheme offers low-income earners the opportunity to boost their savings by 50%.
However, uptake of this cash-boosting incentive has been slow, with only 81,000 of the eligible 3.5 million people taking advantage of the scheme. John Glen MP, economic secretary to the Treasury, revealed the unimpressive figure in response to a parliamentary question on January 10th 2019.
So, who is eligible for the scheme and how does it work?
Those receiving working tax credit or universal credit are eligible to open a Help to Save account. If you and your partner are both in receipt of either of these benefits, you can both open an individual account. If you both take advantage of the scheme, you're effectively doubling the available savings boost.
The scheme will only affect your benefits if you or your partner already have savings in excess of £6,000. However, for those in receipt of working tax credit, having over £6,000 in savings won't affect your eligibility.
Compared to the savings accounts offered by banks (which tend to have an interest rate below 1%), the 50% bonus offered through the Help to Save scheme is extremely generous.
Once you've opened your Help to Save account, you can use it for four years. You can put away up to £50 a month and the government will top it up by 50%. The bonus is added on the two-year anniversary of the account being opened and again at the four-year mark. If you were to save the maximum amount each month for four years, you'd put away £2,400 and receive a respectable £1,200 bonus - meaning you'd end up with £3,600 in total.
Even if you're not able to put away the maximum amount each month, it's worth saving what you can. If you saved just half the maximum each month (£25), you'd receive a £600 bonus and have £1,800 in savings after four years.
The Help to Save scheme is intended to allow those on lower incomes to build an emergency fund. Having some money to assist in an emergency provides security and is much more cost effective than lending from a payday loan company.
If you want to take advantage of the Help to Save scheme, you can check your eligibility and set up an account on the government website.
Want to save for a mortgage? There are several other government initiatives you may be eligible to take advantage of. Have a look at our guide on Help Available to First Time Buyers.