Help to Save NOW OPEN: when it's worth it, and when it isn't!

There is some confusion about for whom it is worth saving in the new "Help to Save" a/cs. I'm surprised I can't find any pages which have actually crunched the numbers. So I'm going to pitch in. For anyone who doesn't know the rules, they're here, [edit: you can go there to apply and open one now, I've opened for my wife and myself already].

In the first two years its a no-brainer. Unless you are on one of those 49.9% credit cards, if you're eligible jump at it, feed in the max of £50/month.

CALCULATION: over the 2 years you'll build up a total of £50 * 24 months = £1,200. The bonus you get is £600, so you end up with £1,800.
A standard savings account which would match this would have to pay 44.5% interest. I won't start the calculations here, just go to a "Regular Savings Calculator" like no. 1 or no. 2, input the following
So again, unless you have a savings account which pays more than 44% (after tax), or you've debt which costs more than 44%, Help to Save is for you FOR THE FIRST TWO YEARS.


For the second 2-year period its not so simple. They make it look as though its as good, but its not at all, its almost 3 times less! Tricksy hobbitses. This is because apart from the monthly amount, you also have to have the first £1,200 sitting there. (The first £600 bonus is paid out to your bank account so you can do whatever you want with it, so isn't relevant to the following).

CALCULATION: over the second 2 years you'll build up an additional £50 * 24 months = £1,200, plus the original £1,200 from the first 2 years, to a total of £2,400. The bonus you get is again £600, so you end up with £3,000.
A standard savings account which would match this would have to pay 15.5% interest. For this you have to use calculator no. 2 which allows you to input an initial amount, and input the following
So for the second 2-year period its very questionable whether its worth it or not. Its certainly better than savings, but not better than a lot of credit cards, as even within the normal range you can easily find rates higher than 15.5%.


CONCLUSION: (almost) certainly go for it in the first two years, in the second two years think about it!


NAME AND SHAME: these two [STRIKE]trusted[/STRIKE] websites which haven't bothered to work it out properly and are therefore AFAIK giving inaccurate advice:

1) this Which article says right at the bottom "Help to Save is meant to encourage working people on low incomes to build up their savings. But, if you have expensive debts to clear, make this the priority" - in the first two years this will hardly ever be the case, the article should explain this

2) A certain Mr M. Lewis :money: quoted in this MSE article as saying "there is a risk 'Help to Save' could substantially mis-prioritize people's finances. ... the cost of debt for most usually vastly outweighs the gain of saving", and that you should pay back a 30% credit card before using Help to Save. As explained this is WRONG in the first two years, although he is correct about the second 2 years. Again, disappointing that they haven't crunched the numbers, I mean that is their job isn't it


QUESTION: does anyone know why the thisismoney calculator gives different results to the 2 calculators I've used? According to them, the figure in the first calculation should be 40.26% instead of 44.5%, quite a difference!


EXTRA TIP: You can choose the monthly payment date from the whole month and it doesn't make a difference. I.e. if you open the account on 1st May, it doesn't matter whether you pay in money on the 1st or the 15th or the 30th. So I suggest you make your standing order as late as possible in the month so that you can earn interest on it until then in your normal savings account. (Just don't make it too late or a bank holiday could push the payment until the next month, e.g. if the 30th is a Saturday, and this will presumably mean you've missed the month's payment chance. And don't forget about Xmas :xmassmile).


PS: If you can't afford the full £50 a month, the same %ages are true no matter what your monthly payment is.