The 1p challenge: Can you save £600+ per year?

The 1p savings challenge has taken on a life of its own in recent years, as frugal-minded savers have realised it's possible to turn 1p into £600+. NimbleFins takes a closer look.

Looking for a savings habit for the new year?

The 1p savings challenge requires just a single penny to start with and if you stick with it throughout the year, you'll be left with a handsome pot at the end of December.

Here’s everything you need to know about the 1p challenge and how you can get involved...

What is the 1p savings challenge?

The 1p savings challenge works like this…

You begin by saving 1p on 1 January, 2p on 2 January, 3p on 3 January, 4p on 4 January, and so on.

In other words, the goal is to increase your daily savings rate by 1p every day for a full year.

Closely follow the rules of the challenge and the sum you’ll need to be putting away mid-year on 1 July will have risen to £1.82.

Your final sum, on 31 December, will be £3.65.

How much can you save?

The 1p savings challenge is popular because it requires only a token amount to get started.

While the sums you'll need to squirrel away get larger as the year progresses, the most you’ll ever need to save in a single day is just £3.65, the price of a coffee!

If you do manage to complete the challenge you’ll have saved a tidy £667.95 by the end of the year (or £671.61 if it's a leap year)!

What if you miss months or start late?

While the 1p savings challenge is designed so you only need to put away small sums each day. However, if you’re late to the challenge, or you've accidently missed payments - it’s still possible to join in or continue the challenge.

  • Joining mid-year? Simply calculate how much you should have been putting away on the day you officially start the challenge, then continue from there. For example, if you start on 1 February, then you'll have missed out on saving £4.96 during January. So start with this amount, and then add 32p on 1 February, 33p on 2 February and so on. Obviously the later in the year you join the challenge, the bigger the amount you’ll need to start with. (See the table below).
  • Missed payments? If you’ve forgotten to save on a day or two, then simply work out how much you should have been saving on those dates and add it to your pot.

What’s the best way to complete the 1p challenge?

If you’re the forgetful type and at risk of missing payments, then it could be a good idea to set up standing orders to transfer cash automatically from your bank account to your savings pot.

However, it’s worth knowing that some banks may not allow you to set up a standing order for very low amounts. If this includes your bank, and you don't want the faff of manual transfers, then you may wish to take on a monthly view of the challenge.

To do this, all you need to do is set up monthly standing orders for the total you need to save every month. Here's how much you'll need to save throughout the year:

Monthly savings required

While monthly standing orders aren't entirely within the strict rules of the 1p savings challenge, it’s a lot more straightforward.

If you’re more a traditionalist, however, then there’s nothing wrong with relying on a trusted piggy bank (remember those?). Just make sure that any metal tin you use is capable of holding more than £600 worth of copper!

Looking to save bigger amounts? Consider a regular savings account

While the 1p savings challenge can be great for those who would otherwise find it difficult to save, if you’re able to save bigger amounts each month then it’s possible a regular savings account could be for you.

These specialist types of savings accounts allow you to save a decent wad of cash each month.

In addition to providing you with some motivation to save regularly, regular savings accounts often come with headline-grabbing interest rates.

Right now, First Direct offers a regular savings account for its own current account customers that pays an impressive 7% AER fixed for one year. The account allows savers to stash in up to £300 per month, which isn't too shabby!

If you don’t have a First Direct current account, or don’t want to open one, then many other big-name banks, including Lloyds, NatWest, and HSBC all offer regular savings accounts for their respective current account customers.

To learn more, and to discover other options, then take a look at the regular savings account section of our best savings accounts accounts guide.

Got a lump sum? Easy access could be for you

Saving regularly can be a great way to build up a rainy day fund, whether that's via the 1p savings challenge or otherwise. But if you’ve already got a lump sum, it’s worth making sure it's sitting in an account that pays a decent rate of interest

Right now, the top easy-access savings account is from Coventry Building Society which pays 2.85% AER variable. However, you can only make six withdrawals per year penalty-free. If you make more than this then a 50 day interest-penalty will apply on anything you take out.

If you don’t like this stipulation then the next-highest rate is from Atom Bank which pays 2.55% AER variable.

For more options, including fixed accounts where you can boost your interest rate, take a look at our best savings accounts accounts guide.

Karl Talbot

Karl is a personal finance expert who specialises in writing about savings accounts, credit cards and cheap personal loans. Karl has worked for a number of personal finance publications including The Motley Fool and MoneySavingExpert.