The Savings Fountain Discussion Area

[MSE Martin]

Click here (http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1103213261,45760,) to read the article this discussion relates to.

To ask a question or discuss this, then click reply

[mistral]

Martin I have this system exactly in place.

But with the added pleasure off Egg paying interest on their own money , this being after the credit card transfer .

I do worry a little at the slight loss of inteterst with moving the money out of my ING account .

I will await my year projections for interest profit .

You could start some test case examples on the site .

I have also got the phone tariff working nicely .

Credit cards are different as I think it does not pay to go for broke ,but massage the system carefully .

I may be missing out on interest this way however !!

You may have forgot one loophole which is saving within your childs account .

I know you have not got any yet ( is the sky lady single ,)

but you can save within them as long as the total gross interest for the year does not exceed £100.

I may have a few of these figures wrong so I await a telling off from Lisyloo .

Now have we missed anything else ?

[MSE Martin]

Sounds good to me MC.

I just checked - i did put a note about child accounts in the Savings Fountain - and it is an important one. However if you are simply using it as a tax break. It is important to do it carefully - and i didnt want to confuse the issue
:)
Martin

[isasmurf]

Noticed one small error in your article Martin. The cash ISA limit goes down to £1,000 from April 2006, not 2005 as you had said.

[MSE Martin]

Slip of the keyboard... thank you.... I've changed it :)

Dear Martin,

Regarding the Savings Fountain - great system! I already have it in place. Just an update on some details:

The Derbyshire Regular Savings Account now allows monthly deposit of between £10 and £1000. Also, until 30 April 2004, they will allow you to open two accounts, therefore allowing £2000 pcm!

Wish I had that kind of money! ;)

Dear Martin

I'm confussed!

I have arranged to open a mini cash ISA this year and will pay another £3000 into it in the new tax year - no problem.

I also have savings in an ING account which I was going to drip feed into the suggested Halifax Regular Saver Account. Here is where I'm confussed - the assistant in the Halifax advised me that if I put £250 per month into the Halifax Regular Saver at the end of the year I would get £98 gross interest. Whereas if I left my £3000 in the ING account at 4.5% I would get £135 gross interest at the end of the year. Therefore it makes more sense to keep my money where it is in the ING account.

What you are saying is a good idea but as I said I am now rather confused and would welcome your comment.

Many thanks

[MSE Martin]

You've forgotten if you put £3000 into halifax it'll take a year to get it all there. !However you will still be getting interest on the remainder in ING

think like this

Month 1 ! HAlifax £250 !ING £2,750
Month 2 Halifax £500 ING £2,500
Month 3 Halifax £750 ING £2,250
etc

so as well as the halifax interest, the money in ING is earning interest too. !Total these together and you get more interest than ING alone.

This is all in the calculation. !I've seen elsewhere on this site people saying Halifax doesn't really pay the 6.05% because of the drip feeding. !So let me clear it up.

The way to think of it isn't Halifax pays less, but effectively you're not investing £3000. !Over one year with halifax the average investment amount is roughly £1,500. !Providing your drip feeding from another account then its the best way - thats one of the reasons I invented the fountain :)

martin

Martin

Many thanks for your quick reply. !It all makes sense now! !

It might be of interest to you but the assistant in my local Halfax turned me away from this account and told me she had done the same with other people who were in a similar situation to myself.

No longer Confused

[Margaret_Millne]

Martin

I have a Halifax Monthly Saver, with its anniversary in July. I was paying £500 a month into this, which I have now split £250 to this account and £250 to the new regular saver.

Come July, I will no longer be able to support payments to both, although I understand the Monthly Saver can continue, and receive the bonus each year.

My question is:

Would it be worth my withdrawing enough from Monthly Saver Account at the beginning of August to be able to put it into the Ing Direct account, and start the drip feeding process all over again, or would I be better just putting it back into Ing Direct and leaving it there?

This is good advice, but I have another line of question;

I have c.£5k capital to come back from a maturing Tessa... would it make more sense to knock £5k off my motgage & avoid interest payments (currently 5.25%) for the next 5 yrs, or invest same in one of the best-buy TOISAs ?

[Ebenezer_Screwj]

Martin, I have the Savings Fountain in place and have three points for discussion.
1) You say that when a regular savings account is "full", another one may be opened elsewhere. Surely, if funds permit (from a lump sum drip-feed, say) two RS a/c's could be opened to run in tandem to the maximum.
2) Your advice to "drip-feed a regular savings a/c with a standing order from a normal savings a/c" would not work (not with ING Direct anyway) because savings a/c's do not support standing orders. A manual transfer would be needed and care taken to remember to do it each month.
3) ING Direct pays high rate interest, currently 4.50 % pa gross, but PAID MONTHLY. I will be interested to see what the interest netts out to after basic rate tax, because institutions usually offer a lower rate of interest when it is paid monthly. Maybe ING calculate theirs on a different basis.

[Galstonian]

With ING you can setup transfers in advance so you can set up a "pseudo standing order".

I have to admit the theory is exactly the same as the "leaky bucket" principle. !Pour your savings into the bucket at the top, holes drip feed ones that can't take lump sums and poorer rate accounts catch any "overflows". !Needs a picture really I suppose.

ING is paid monthly but calculated daily.

[ED]

<< With ING you can setup transfers in advance so you can set up a "pseudo standing order". >>

Galstonian, this is excellent news! Anyone here know of any bank or building society that doesn't accept monthly payments for 'regular saver' accounts done in this way?

[Fastflys]

Hi Ebenezer_Screwj

ING gross interest rate paid monthly is 4.41% [3.528% net if standard rate tax payer]

Dear Sir

I am a new member of the 'MSE' family, but becoming adicted fast.

OK, I've got the £3k in the ISA (Marks & Sparks).

The bulk of my 'fortune' is stored in ING @ 4.5%

I need the intermediate 'Regular' bit in place, I go for Halifax @ 6.05% (let's be greedy).

The trick is moving the funds from ING to 'Halibut' simply and at the right time to maximise the profit, my understanding is a second Halifax is required, yes?

Hence, ING - Halifax - Regular.

Now there is a transfer delay ING to Halifax, say three days, where is my money in that period, I assume I'm getting interest from someone. I suspect ING pay until received by Halifax, again the transfer from Halifax to Regular should be dynamic with no delay.

But before you start the process, you must throw a double six.

Regards

[ED]

Welcome, not-so-Gullible Pauper!

Interesting point you raise - concerns me, too...

Halifax require the 'Regular Saver' a/c to be opened alongside a 'Web Saver' or other suitable Halifax a/c (to receive the £'s one year hence). So, for the reasons you state, I'm experimenting by making my April deposit to Halifax 'Regular Saver' via Standing Order from Halifax 'Web Saver' a/c.

Any MSE already doing this for Halifax's other regular, monthly a/c? If so, is a SO necessary, or could we instead just do a manual online "internal transfer" any day in each month?

I'm told my 'Regular Saver' will be credited same-day, instead of nil interest for 2 banking days, as happens when a SO leaves a non-Halifax a/c (eg on a Thursday) before reaching the Halifax 'RS' a/c (eg on a Monday) - 4 days with nil interest, bah, humbug!

[robnye]

any delay in the posting of money into an account sent from another bank/bs is in the hands of the sending bank....... and not the receiving.

I regularly transfer money from one account (bank) to savings, the only one that doesnt penalise me in any way is the bank to savings transfer where both accounts are with the same bank (ie A&L)

this is how most uk banks/bs use our money in this way for their own intentions......! !>:(

Thank you for your welcome Mister Ed

Exploring the situation a little deeper, please correct me if I'm wrong. (I'm sure someone will be only too pleased to do so)

OK, I play the game £3k into Halibut on the drip, which means per annum I have an average of £1.5k in ING & £1.5k in the Halifax.

This draws interest at:

Halifax £1.5k @ 6.05% = £90.75
ING £1.5k @ 4.50% = £67.50

Total = £158.25

Leaving it in ING (no hastle).

ING £3.0k @ 4.5% = £135.00

I therefore increase my interest by £23.25

Bearing in mind the lost days of interest shifting it about the system (it's in limbo).

Reduces the saving again, knock the £3.25 off.

Profit, say £20.00

Less tax, leaves say £16 profit

However, let's not forget the other expenses, petrol, stamps, 'your time', whatever.

Also, remember miss a payment, etc

Is it worth it.

Please tell me where my calculations are faulty, it seems the benefits are 'buttons' for all the work.

[Galstonian]

If you are going to use a regular saver account it is much more beneficial if you can leave the money after it has built up - unlike the HFX which forces your money out after 1 year. Look at Martin's recs for accounts, the rates are around 5% rather than 6 but after more than a year it makes sense.

[ED]

For eg, Derbyshire BS pays 5.20% gross for their regular, monthly a/c (£10 – £1,000 per month).

Yorkshire BS's Monthly Saver a/c = 4.90% (£10 - £100/month).

Leeds & Holbeck's Regular Saver a/c = 4.80% (up to £500/month).

I don't recommend Britannia BS. Their Regular Saver a/c has paid only 4.15% since December, rising just 0.10% on April 1, whereas last yr it was a market leader @ 4.85%. Any MSE ever complained to Britannia (I'm preparing…)

If a lump sum can be tied-up with 3-months withdrawal notice, Nottingham BS's Post It a/c pays 4.90% (incl 0.90% bonus) – min £1,000 deposit, additions can be via BACS.

[ED]

Regular, monthly savings a/c of Norwich & Peterborough BS pays 5.05% gross when the a/c holds £10,000+ (possible after 20 months regularly depositing the max £500 allowed). Meanwhile, interest is only 4.15% for balance up to £999 – as bad as Britannia BS :-( N&P pay 4.40% for £1,000+ balance (achieveable after just 32 days!), & 4.65% for £5,000+.

Any MSE got a Norwich & Peterborough monthly a/c? Do you drip feed it via internal transfer from N&P's online savings a/c (4.30% gross)? I've had such an a/c for 3 years, and wanted to open a monthly a/c with N&P, but they messed up re the proof of iD+address documentation I recently supplied. Consequently, I'm less keen to entrust house-sale proceeds to their online savings a/c. Eager to know experiences of MSEs who are Norwich & Peterborough customers.

??? :-/ sorry to sound a bit dim but i have been saving in isas for the last few years and whilst the halifax 6.05% sounds great is it really any better after tax? :-/ ???

[Galstonian]

No its not better. But ISAs have limits and the idea is to find a way to maximise the benefits from each of the top products in turn.

[ED]

Internal transfer – as opposed to Standing Order from an external bank a/c – seems a prudent way to make monthly payments into regular savings a/c's with some banks and building societies.

£'s flowing from my Savings Fountain now successfully trickling direct into monthly a/c's with :

– Halifax plc : over-the-counter £'s -> Cardcash a/c -> online to Web Saver a/c -> internal SOs to Regular Saver a/c + Monthly Saver a/c

– Coventry BS : NetSave a/c -> online transfer to CallSave MoneyManager a/c -> internal transfer to Monthly Saver a/c

I've avoided 4 days nil interest on £'s – from my external bank, it would have taken 3 banking days by Standing Order. £'s leaving on Thurs. 1st April wouldn't have reached monthly a/c's till Monday. I just need to remember to supply £'s appropriately not later than 1 banking day before the automatic transfers, each month.

Hoping to add Norwich & Peterborough BS to my Fountain.

Wondering if it's worthwhile with Yorkshire BS – their eSaver a/c (4.35% gross) requires min bal of £1,000, but monthly a/c only allowed to receive max £100 per month. Online states £'s take "5 banking days" to transfer to a cheque a/c, so I'm not tempted to stash much cash in eSaver.

What other regular, monthly a/c's can be fed via internal transfer with the same bank or building soc?

For instance, anything suitable for :

– Derbyshire BS
– Leeds & Holbeck BS
– West Bromwich BS
– Chelsea BS

+ others MSEs may have discovered :-)

Hi, just wondering..

If I'm not a taxpayer now but will be in the future, and I happen to have some spare cash to save, is it worthwhile sticking it in an ISA so that when I do become a taxpayer it will be tax-free interest on the money I have already saved?

Hope this isn't too stupid a question and someone can help:)
Rosie

Halifax Regular Saver 6.05%

I am a non tax payer.

Do Halifax pay their interest gross ?

If not can the tax deducted be claimed back from
the Revenue ?

DH

[Kazza242]

Hi, just wondering..

If I'm not a taxpayer now but will be in the future, and I happen to have some spare cash to save, is it worthwhile sticking it in an ISA so that when I do become a taxpayer it will be tax-free interest on the money I have already saved?
Rosie

Yes, it is definitely worth opening a mini cash ISA, even if you aren't a taxpayer at present, as you will be in future.

Inland revenue rules do allow you to invest £3,000 per tax year in a mini cash ISA. !If you don't use your allowance then you lose it as you cannot carry it over to the next tax year.

Check out the best buys: cash mini isa best buys (http://www.thisismoney.com/savings_rates/isa.shtml)

When looking for a mini cash isa it is better to opt for one which comes with a CAT standard. !This will help you to find an isa that has fair Conditions, Access and Terms, but read the terms and conditions before signing up.

Derek - Yes, Halifax do allow interest to be paid gross. !It is better to register for gross interest at the outset rather than waiting until the account matures to claim back tax. !

To register fill out the Inland Revenue form R85, available from tax offices, banks or building societies. !You can also download the form from the Inland Revenue web site: Inland Revenue R85 form for 2004 (http://www.inlandrevenue.gov.uk/forms/r85.pdf)

I was wondering if you had any tips about ethical savings accoungs - how should I go about finding the best deal?

[ana]

I am hopeless with money and very new to the idea of saving it! By sheer luck I have managed to get my debt which was at £25,000 last year down to zero and so now am in a position to save at least £500 pounds a month. But where do I start? What is the best option for me? The aim is to have a decent deposit for a house/flat in 2 years time. Can someone advise? ???

[Leia_Stephens]

I have posted a message for you, ana, in the "Have £500 to save - What is best option?" thread that you started :).

Leia

[scorpio04]

Please can someon let me have the link to the article regarding the savings fountain. If I use the one at the top of this post it takes me to one that invites me to click on a link to updated article but that brings me back to this board. Am I doing it wrong?

:-/

[ohit]

http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1091670686,99383,

[ohit]

Or rather, http://!!!!!!!.com/5v2p9

As the forums can't do it straight...

[Leia_Stephens]

I love that web site address: !!!!!!!.com :D.

[ocemeer]

:-/
Where to put £70,000?

just sold my house :D, want to save/invest the money to use as a deposit on another house in abut 12-24 mths time.
I have used all my isa limits though will use husband's limits this year too, both of us have ing accounts, and I have regular investments in shares. The mortgage/living expenses can be covered from one of our wages the rest needs to be saved too. Just to add to the confusion, the wages halve in two years time as I become a kept woman (it will make a change) and go to university to study physiotherapy. 8)
Advice ideas, anything would be welcome

[david78]

You could get the maximum amount of premium bonds.

[Popsie]

Martin, I have a question about savings, which I don't think you have covered in your weekly articles on the main site.

Firstly, I am a non-tax payer. I want to save about £3k per month to use for school fees which I would need to draw out at the beginning of every term. None of the regular savings accounts will suit, as the max. deposit is too small - have you any ideas? Otherwise I would try the Derbyshire which is paying about .75% more than my present ING account.

Secondly, I want to put in a lump sum of about £100k since we have just re-mortgaged, and we have borrowed an excess so that we can use this in the future for planned work to the house. I will have this money by the end of next month, I think, and will need £50k in Feb/Mar next year, and the rest by about June/July. How should I deal with these amounts? I am hoping to "make" money on this as the interest rate I am looking for might just about be higher than our mortgage rate.

All this assumes I have paid off all existing debt before we start.

Any ideas?

[Hilreid]

Martin,
Just read about the Abbey savings account at 7%. I currently have £2000 stored in an ISA (if.com) and about £300 in an ING Savings account.

Would I be better off transferring all this across to the Abbey account for a year? I dont need to touch it until next June at the earliest.

Thanks.................. ::)

[MSE Martin]

Hilreid.

It depends on two things - first your tax status. A non taxpayer would definitely be financially better off drip feeding for a year into the regular saver.

A basic rate taxpayer you are getting a net rate of 5.6% on the regular saver - marginally better than the best cash ISA.

A high rate taxpayer is much better in the cash ISA

Yet this negates one fact. Your cash is tax free in the cash ISA, once it's out it can't be put back. That tax status may last for a long time, and therefore by moving over for the marginal short term gain, you are potentially denying yourself access to the tax free savings in the future. Especially considering that soon the allowable cash ISA amount will drop to £1000 from £3k

Hope this makes sense.

martin

[deemy2004]

Martin,
Just read about the Abbey savings account at 7%. !I currently have £2000 stored in an ISA (if.com) and about £300 in an ING Savings account.

Would I be better off transferring all this across to the Abbey account for a year? !I dont need to touch it until next June at the earliest.

Thanks.................. ::)

Why not move it to the Halifax 5.8% ISA.
Don't confuse regular accounts with ISA's - An ISA IS TAX FREE ! and does not count against your taxable earnings. The Abbey net is 5.6%, you can get 7% if your total gross earnings are less than 4.8k

[rosyrush]

I am a novice-recent joiner ofMSE but need some advice... would like to use a lump sum of 30,000 (from retirement) in best way and already have cash Isas... so after reading the Fountain articles, I'm wondering about using it as many of above are doing.... But am unclear about procedure and difference between the Standard/Regular/Savings account option. I have a Nationwide postal account... and one other savings account. Does anybody have the patience /time to describe to me using a 1, 2, 3 etc list of instructions as to the procedure needed for the "drip feed option" into one of the accounts mentioned, like Derbyshire or Nottingham or Alliance and Leicester? I don't need to have instant access for a year or two...Many thanks in advance, from Puzzled Pippa

[lordgaz]

Re: Setting Up a drip into a regular savings account:

Hi, I have set up my £3000 ISA with Abbey and I am just about to apply for the Abbey regular saver account.

My problem is how to drip feed in £250 a month from my Egg savings account.

I can't seem to find the facility to set up a regular payment from the Egg ac.

Can you suggest a solution, (I have a standing order form from Abbey for the regular saver AC, but I am unsure if it will work with the egg account)

Can you suggest a good high interest intant access account that allows standing orders if the Egg one doesn't work?

Cheers in advance...

GAreth

[kah22]

David 78 said try premium bonds and that is, I think, a very good idea.

A few years ago I started to buy PB's £100 here £500 just when I had a little extra cash at my disposal. Once I hit £1500 it began to pay dividends I have now won about £1k and I automatically reinvest it.

At present I have my target set at £10k and most of that will be through winnings. OK you need a little luck, but it only takes you to be lucky once - and now that I've discoverd MoneySavingExpert maybe my luck is beginning to turn. ;)

[Jpotter]

Hi,

I'm new to all this and am trying to work out where to put an inheritance my family has just obtained. The figure is £175,000 and we don't know where to put it for max yields. The added complication is that we need the interest to go to my mother-in-law who is in a care home to pay for her care. This raises tax issues of course.
Any help would be most appreciated

[tiny1]

Martin - what a great site :)

Could you and other experienced MSE's please kick start me with some advice and direction.

I am a Brit expat employed in the gulf area on a tax free income.

My wife and children are in UK.

I send all my tax free income to UK each month - joint Halifax account, direct debits are set up to pay mortgage, insurance, rates etc.
The good wife spends whatever is left :confused:

I want to set up a savings fountain before my wife gets to spend what I earn on doodads which are a waste of money.

I admit to being totally confused on what type of savings "vehicle" to use. Would it be correct to set up yet another direct debit and transfer funds to an ISA in my name, my wifes name and the childrens name ?

If so which ISA would you advice?.

Would transferring the tax free income into premium bonds be a better strategy ?

Have I got it totally wrong - if so please advise on a better strategy ?

sorry for being so dim, I feel isolated out here and I have nobody to bounce savings advice with.

tiny1

[Katie]

Hi Martin. We've got a Virgin One current account mortgage which charges interest on what we owe at 5.95%. When we opened our account they said that we were better off having all our money in the Virgin One account than having any in savings accounts as keeping the money in the account will lower the amount of interest paid. This seems to have worked for us as we are set to pay off our mortgage in about 6 or 7 years instead of 25! But do you think we would be better having ISAs as well as our One account?

Thanks

Katie (first time 'poster')

[paul666]

... Virgin One current account mortgage which charges interest on what we owe at 5.95%. ... better having ISAs as well as our One account?
The ISA would have to do better than that rate. Unfortunately, most of the ISA's have restrictive conditions on them like a) you can only have £3,000 / year, b) you can't take the cash out then put it back and c) if you see a better rate and want to transfer it'll either take weeks and you may incur a £25 penalty.
You've done well so far, and a virgin one account is a no brainer - never having to worry about if your money is working hard enough, because most of the time it is. Just keep remembering to pay those bills as late as possible and use a cashback credit card constantly (not the virgin one 'credit' card)

[ED]

Just seen this thread for the first time in ages. As several people have gone unanswered, here are a few ideas... (For actual advice, maybe some of you have by now consulted a Financial Adviser...?)

Lordgaz - I see 4.75% gross interest is currently offered by Egg.

4.85% is available from Coventry Bdg Society for their 'NetSave' account (£1 minimum balance). This allows customers to set up, online, Standing Orders - eg to regular, monthly savings accounts with banks and other bdg societies (such as Derbyshire's one paying 5.85%). At least one banking day before your SO is due to go out, you could supply the NetSave account with funds from Egg or elsewhere (allowing for BACS transit time - typically 3 or 4 banking days).

Jpotter - Have you made your decisions, by now, for the £175,000? Hopefully you chose to spread it between several financial institutions (maximum of £35,000 with each), just as a precaution.

If you are still seeking savings accounts paying highest interest, have you explored links from this site to MoneySupermarket website? Perhaps some of the money could go to Nottingham Bdg Society's 'Post It' account which pays 5.50% gross (90 days withdrawal notice required). Alliance + Leicester's 'Online Saver' offers 5.35% (overnight access via their cheque account).

tiny1 - Perhaps the Coventry BS 'NetSave' account would be useful for you to filter up to £1,000 per month into Derbyshire BS's regular, monthly savings account using Standing Order.

rosyrush - True, it does take a little patience and perhaps courage to drip feed a capital sum via monthly Standing Orders. However, it is very satisfying to see the 'pot' grow, especially with accounts such as Derbyshire Bdg Soc allowing as much as £1,000 per month to be deposited. So, one year hence £12,000 of your £30,000 nest egg could be in Derbyshire's care. It gets exciting when calculating the approximate amount of interest likely to be gained @ 5.85% in Derbyshire on yearly average of £6,000, compared with X% where your money is at the start.

Your last post, here, was way back last October. So just wondering if you went ahead with the Savings Fountain principle...? Any questions?

[lipidicman]

It gets exciting when calculating the approximate amount of interest likely to be gained @ 5.85% in Derbyshire on yearly average of £6,000, compared with X% where your money is at the start.

You can do the calculation better

Do 1.0585^(1/12) (thats to the power of - there is no superscript here!) for the 'monthly rate' and we will call this 'm'

end of | balance why doesnt formatting work here? :(
month |
1 | 1000*m
2 | (1000*m + 1000)*m
3 | ((1000*m + 1000)*m +1000)*m

You can see this is 'iterative'. Each time you add 1000 and multiply by 'm'

This will cheer you up as the figure you get is slightly larger than the method you described! It is a more accurate way of calculating the interest - the banks will be even more accurate and do it daily.

But then you have to do the reverse on the account you are drip feeding from ie take away 1000 and multiply by the appropriate amount!

[tiny1]

Thank you ed

[ED]

You're welcome, tiny1

[lipidicman]

Did you miss my calculation tip ED? Its really very easy to do with a spreadsheet and very useful if you want to check and you have made irregular payments (you can work out a daily rate and the number of days for each balance etc)

[sd8974]

Am I correct in thinking that the current ISA allowances are now to be extended to 2010 - as proposed last year in the pre-budget report and then confirmed in this weeks budget?

[ED]

lipidicman - thanks for the useful earlier post. I'll certainly try out the method you describe.

For simplicity, I tend to work on 'differentials' (not very precise, admittedly!).

Example, having opened an account 12 months ago, my nest-egg currently earns approx :

£12,000 @ 0.50% differential [gross interest]
(ie 5.85% in Derbyshire monthly savings a/c,
instead of 5.35% in Alliance + Leicester 'Online Saver')
= £60.00 EXTRA gross interest (= £48 extra interest net of tax @ 20%)

When a potential gain is small, I then also calculate the small loss for 2 or 3 days per month earning nil interest while £'s are in transit via Standing Order. (Incidentally, this weekend's Telegraph newspaper is to feature an article about same-day banking coming to the UK within 2 years, hopefully.)

It would be interesting to see other people's ideas of simple methods to evaluate whether to open accounts new to the customer, based upon interest rates. I believe sharing ideas can help elder people, along with youngsters, anyone new to freedoms beyond their one-and-only-ever bank + bdg society counters, and people considering starting with the Savings Fountain.

[Milarky]

You can do the calculation better

Do 1.0585^(1/12) (that's to the power of - there is no superscript here!) for the 'monthly rate' and we will call this 'm'

end of | balance why doesnt formatting work here? :(
month |
1 | 1000*m
2 | (1000*m + 1000)*m
3 | ((1000*m + 1000)*m +1000)*m

You can see this is 'iterative'. Each time you add 1000 and multiply by 'm'

This will cheer you up as the figure you get is slightly larger than the method you described! It is a more accurate way of calculating the interest - the banks will be even more accurate and do it daily.

But then you have to do the reverse on the account you are drip feeding from ie take away 1000 and multiply by the appropriate amount!

lipidicman,

If I have understood your post correctly, you are wanting to take into account compounding effects on regular saving accounts assuming that they don't always accure interest on a simple daily basis 'intra-year' - but compound interest daily - in effect.

As far as I know Egg is the only savings institution to do this and everyone else will work with 'simple' daily interest within the periods [typically a year] up to with they pay interest regularly.

More generally:

If you have simple daily interest, 12 equal monthly payments, the amount of interest expected becomes:

12 x single payment x 78/144 x annual interest rate x 80%

Here, the factor of '78/144' is just the sum of 1/12th x 12/12 + 1/12th x 11/12 + 1/12th x 10/12... for all the time that each payment made spends on deposit in the account. This is the 'upper limit' for RS accounts, because it assumes each payment reaches the account and begins earning interest from the first day of every month - in parctice this cannot be achieved. [The '80%', by the way, is there to allow for tax for basic rate taxpayers - it would be '60%' for higher rate taxpayers, of course]

The 'lower limit' will involve a factor of '66/144' instead [that is, 1/12th x 11/12 + 1/12th x 10/12 etc] where each payment reaches the account only on the last day of each month.

The 'median' of these two limits will be '72/144' of course - exactly half - based on the assumption that each month's payment reaches the account a the mid-point of each month [on average]

A 'quick and dirty' way of estimating annual interest is to take a figure somewhere between '78/144' and '66/144' proportionate to when you think inthe month the regular payment hits the account.

For instance, if your standing order leaves your bank on the '1st' and takes two days to reach your RS account that would be at least '1/144th' of a year later. Thus you would subtract '1/144th' from the upper limit '78/144ths' to give '77/144ths'. But, make further allowance for the inevitable weekends and bank holidays, you would have to add a further two days on this average. So you will then be subtracting a second '1/144th' from the above and come out with an adjusted factor of about '76/144'

So my best 'guesstimate' for a RS account paying 5.85% interest on £1000 monthly payments, set to the 1st of each month, would become:

12 x £1,000 x 76/144 x 5.85% x 80% [60%]

[ED]

Do all building societies + banks calculate interest accurately, according to the precise day each monthly deposit reaches the account?

Or do any of the BSs + banks assume deposits arrive mid-month?

Some savers make the effort, each month, to adjust the date of Standing Orders so cleared funds arrive on the 1st day of the following month, or first available banking day thereafter.

eg :

30 March - SO departs source a/c

1 April - cleared £'s reach regular saver a/c

[Milarky]

30 March - SO departs source a/c

1 April - cleared £'s reach regular saver a/c

Snap! I'm paying Abbey RS from cahoot [3 days] so making April's payment leave on 29th this time. It should arrive OK on the 1st [Friday] but what if it 'falls short' and got there on 31st March instead - how do explain that to a company that insists on being paid by a SO that arrived in the 'wrong' month?

Seriously though I believe that all these organisations do calculate interest accurately on a daily basis - not assuming that payment on a particular date [in any case they don't know when in the month to expect payment as you set up the SO yourself - they insist that you decide!]

BTW, I read recently that Lloyds are currently the only bank to credit BACS payments with extra days interest after these leave the account]

[ED]

Milarky - indeed that is interesting about Lloyds TSB crediting outward BACS payments with an extra day's interest after debiting the account.

Trouble is Lloyds doesn't seem to want me, as I don't have a large salary - but have told them my house-sale proceeds will for several years be filtered from external savings accounts into numerous monthly savings accounts via a current a/c such as Lloyds...

Anyone resolved this sort of dilemma?

[Hobo]

Katie,Thats worked for you, i`m in the same boat myself one thing that concerns me though when as in your case 6/7 yrs are reached it means you have no mtg but no savings , would have been useful to at least have used, as a couple your cash ISA allowance £30,000 till 2010 while it was available for retirement planing etc.
Then continue to pay mtg £30,000 off as it will be a smaller % of income by then.
Even better if you could offset while in the Isa wrapper, i only know of Intellegent Finance www.if.com who do this, not sure if it works the same as the One Account that being a cam mtg

[BUNNYSLAVINGMATTERS :)=]

Hi there.

In response to the I.S.A. investment's. If I am on benefit's I still am a tax-payer right?

Also with regular savings how much % is taken by tax man?

And with an instant I.S.A. if they pay annually, do they pay interest on the total amount that you have invested, or the amount that is in there at the time it pays out the interest?

P.S. Virgin newbie... Great site, been fantasising about a site like this for a long long, but not innocent time! :p

:beer: :T :beer: :T :beer: :T :beer: :T :beer: :T :T :beer:

[isasmurf]

Hi there.
Hi. Welcome to MSE

In response to the I.S.A. investment's. If I am on benefit's I still am a tax-payer right? Everyone is a taxpayer. But all taxpayers get a Personal Allowance for which they don't pay income tax. People whose total income is within this allowance are what everyone refers to as non-taxpayers. The Basic personal allowance for those under 65 is £4,745, but will go up to £4,895 from 6th April. Some people's allowances are different.

Any UK resident over 16 years old is allowed to invest in an ISA, you don't have to be paying tax.

Also with regular savings how much % is taken by tax man?
All Savings accounts (except ISAs) automatically deduct 20% tax from the interest. If your income, including savings interest, is within the personal allowances mentioned above then you can register to have the interest paid without tax deducted. You will need to fill in an R85 and hand it to your bank. They are available from your bank or from the IR website (http://www.ir.gov.uk/taxback/intro.htm)

And with an instant I.S.A. if they pay annually, do they pay interest on the total amount that you have invested, or the amount that is in there at the time it pays out the interest?Most banks calculate interest daily and holds it in a separate pot that you can't see. When it comes to pay interest it pays that pot into your account. So it pays interest on the amount invested each day.

P.S. Virgin newbie... Great site, been fantasising about a site like this for a long long, but not innocent time! :p Hmmm, not another Martin groupie :rolleyes:

[Silver Lilly]

My 13 week old daughters garandparents want to open a savings account for her paying in £10 per month.
We have looked into high interest accounts but you need to be over 18 to open one and the childrens accounts say they would have to be in an aldult name if she is under 7.
We want to have an account in her name so she gets the tax benefit.
We dont want cfc account as we are keeping that separate.
What would you reccomend ?the more i look at accounts the more confused i get!!

[quinlanmd]

If you are limiting your search to just savings accounts, the Derbyshire Regular Savings account @ 5.85% p.a. including bonus might be worth a look.

- Min. £10 per month.
- Allows accounts held as trustee (I'm assuming that as they mention this it is likely that an account can be opened by the grandparents as trustee for your daughter).
- Does require at least 11 of 12 regular monthly payments to get the bonus, though (you don't indicate how firm the £10 a month arrangement would be - this account would be unsuitable if it is an adhoc arrangement)
- 1 penalty-free withdrawal per year is allowed.

Don't worry about trying to get an account in your daughter's sole name - an account held in the grandparent's names as trustee for your daughter with a completed R85 form is sufficient to ensure the savings are tax-free.

[irelandsall]

We only moved the kids money to A&L in December and now we'll be moving it again!
I happened to mention to the girl at the A&L branch that I was appalled by the rate cut and she agreed with me! That's a first. You normally just get the party line.

[Chris Miller]

Martin, I am looking for a not so risky investment to increase my portfolio. I have bought a cheap flat which I rent out, and have an L&G income bond which is performing well. I consider I still have too much money tied up in the building society though, but am afraid to risk too much money-Any suggestions please?

[★jennaphoenix★]

Hey!

Ooo I hate to add up on the mountain of questions! But any advise would be great.

Well I'm off to uni this month. I have read and appreciate greatly the advise given in the students finance page. Thank you very much for that, I will be going with Halifax for they're lovely student overdraft account for sure!

The one thing I want to sort out is a good savings account. I'd like to have all my loans and grants paid into a savings account and then to pay monthly into my student account with the overdraft.

My reason for posting is I would like to find a decent savings account. preferably one aimed at students (hey I need to try sponge what I can right? =P)
Are there such things as perhaps high interest student saving accounts?
I've also been told I should look into getting an ISA?

It's all too confusing! Ahh growing up in the world of money, loans, overdrafts, debt, ISAs, mortgage's etc!?! not very fun! :)

[grumbler]

Hi... I would like to find a decent savings account. preferably one aimed at students ... Are there such things as perhaps high interest student saving accounts?No. You are more likely to find such things as low interest overdrafts aimed at students :D . If you go for Halifax use their Web Saver (4.65% now) and Regular Saver (7%) - I guess you have read the article discussed here.
ISA is good only for taxpayers. Students don't pay tax if they don't have extra income (just submit R85 form(s) to the bank to avoid paying 20% tax on any interest). In this case it is worth having ISA only if you are going to keep some money in it for some time after you finish uni and become a taxpayer: 'ISAs - save tax (http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1045408312,40680,)' article.

[★jennaphoenix★]

thank you grumbler!!

hoorah for me the tax dodger ;)

[lipidicman]

In this case it is worth having ISA only if you are going to keep some money in it for some time after you finish uni and become a taxpayer

This is good advice, since if you are prudent you can have a nice sum tucked away when you graduate, especially as a science grad student where you can get living grants of £12k+ tax-free to live on.

Also a lot of students become tax payers whilst at uni if they work all holidays (5 months in some cases)

It's all too confusing! Ahh growing up in the world of money, loans, overdrafts, debt, ISAs, mortgage's etc!?! not very fun!

Yep, they really need to teach finance at school. The problem is that most teacher's probably dont know enough!

[cjn]

Firstly, great article. I haven't been through the whole of this thread so apologies if I'm repeating anyone, although if I could just pick up on one minor point:

While a Cash ISA may be higher up on the savings fountain than a regular saver, many regular savers offer higher rates of interest. Even after (standard rate) tax, Halifax RSA pays me 5.6%, favourable against 5.25% on my HSBC Cash ISA. Therefore, it would seem worth waiting until March to use my annual ISA allowance; putting the money into the RSA in the meantime.

[jimclark1967]

Firstly, great article. I haven't been through the whole of this thread so apologies if I'm repeating anyone, although if I could just pick up on one minor point:

While a Cash ISA may be higher up on the savings fountain than a regular saver, many regular savers offer higher rates of interest. Even after (standard rate) tax, Halifax RSA pays me 5.6%, favourable against 5.25% on my HSBC Cash ISA. Therefore, it would seem worth waiting until March to use my annual ISA allowance; putting the money into the RSA in the meantime.
Very true, if you can get the timing right this is the best way to do things.

Remember though that ISA interest is tax free for the life of the ISA (another 5+ years potentially) so it wouldn't normally be worth missing a tax year's worth of ISA subscriptions just to feed a regular saver for a few months.

JC

[lipidicman]

Therefore, it would seem worth waiting until March to use my annual ISA allowance; putting the money into the RSA in the meantime.

Remember you can't withdraw from the RS early, so if you opened it in March that's OK. If not you will lose your interest to get it out and into your ISA

[jack1]

What is wrong with putting savings into a long term individual company corporate bond in an ISA ?

[Circle]

I don't know where to post this so here goes!. My son has an ISA with Skandia and he has been send stuff to join something called Money Spider but I can't work out if that is a replacement for Skandia or an addition and what he could gain from it. We are both numpties where investments are concerned. It's all gobbledigook to me and he's dyslexic!

Is he doing the right thing? Anyone heard of Money Spider?

[grumbler]

Anyone heard of Money Spider?Moneyspider (http://forums.moneysavingexpert.com/showthread.html?t=37445&highlight=moneyspider) thread ...

[deemy2004]

Very true, if you can get the timing right this is the best way to do things.

Remember though that ISA interest is tax free for the life of the ISA (another 5+ years potentially) so it wouldn't normally be worth missing a tax year's worth of ISA subscriptions just to feed a regular saver for a few months.

JC

Its highly likely that existing cash ISA's will remain tax free indefinetly , much as the TESSAs turned into the TOISA's

[jordylass]

Sorry if this has been asked before but I can't see it anywhere. I am about to come into a sum of money which I expect to be between 30-50K. I have read all through the savings fountain and I'm au fait with that if it's the best thing to do with my money, but would it be better to overpay on my mortgage. It has 10 years to run at 4.89 and is for approx 80K, there are no penalties for overpayment.

[SallyB]

I've a question about saving - my other half and I are planning to buy together (once we've sold his house and remortgaged mine to buy to let). In the interim, we want to open up a "joint account" into which we'll pay £x amount a month until we move (which at this rate could be next year!!) and then make it our joint slush account - i.e we'll have our own current accounts, but anything housey will come out of the joint slush fund! If that makes sense - what's the best way to do this or to start it? And who with?! Help!!

[goodform]

Is it best to try & pay off capital on your mortgage prior to starting the savings fountain scheme or would starting a maxi ISA be more beneficial?

[Miss Penny Pincher]

Goodform - welcome to MSE. A similar question to yours was pondered on this thread here:

http://forums.moneysavingexpert.com/showthread.html?t=220885

Some key things to consider are if you have a savings buffer (generally around 3 months living costs or income) and if there are penalties for making overpayments on your mortgage.

The thread at the link above looks at how to calculate whether it's best to invest your money into a regular saver, an ISA or to use it to help pay off your mortgage. In terms of savings this depends on the interest rate of your mortgage but please read the thread and let me know what you think / if you have any further questions.

Hope this helps,
Penny x

[Tiff]

Hello Martin,
I'm such a newbie, but I have what I'm sure is a really silly question : who qualifies as a non-tax payer?
I keep seeing this in different places.
I'm on highest rate DLA care & mobility & Income Support with a premium - a new situation for me. Highly unlikely I'll be able to work again.
Could you please advise me about tax situation.
Best wishes.

[Paul_Herring]

who qualifies as a non-tax payer?

Someone who 'earns' less than their personal allowance per year.

http://www.hmrc.gov.uk/forms/r85.pdf

Have a look at that form and fill pages 1 and 2 out. Page 2 will tell you if you're a tax payer or not, page 3 is a form you take to your banks to tell them to pay interest gross if you are a non-tax payer.

[Mum of 5]

Hi.

I've just finished the money diet book and although i thought i was pretty good with money (and knew which bits i wasn't good) it's made me think a little harder. I don't have any credit or store cards and the only debts we have are our mortgage approx £50,000 and that we are normally about £200 over drawn each month, can't seem to clear it with 5 kids. I don't work as i'm at home with kiddies thanks to our low mortgage.

Here's my question. About 2 years ago we started putting £25 into a cash ISA. My hubby and i have no pensions or any savings and are getting a little concerned, i''m 33 he's 30. We don't have any money to spare - literally, holidays in other peoples houses and always thinking about what i spend. kids get what they need to have a quality of life similar to their peers (this isn't that they are kitted in NIKe just that they go on school trips etc!) Anyway i have £300,000 colateral in my house. So i heard you recently say that you should put savings into the mortgage, but then you said you should also have rainy day savings so i'm confused. Should we basically be trying to pay all money into the mortgage and have no savings or should we try to build up some savings??? I understand about the interest rates but isn't having savings equally as important. What do you think?

Also another quicky, it did occur to me after hearing you say that most people's debt is because of life changes, that if my hubby was made redundant, that we would instantly be in trouble. i could temp immediatley and get a good job but that would mean leavign my little ones earlier than i'd like. so i wondered if i should get some redundancy cover and if so what to look for. i hate throwing money away on empty insurance covers. i can't find anything in the book that covers this?

Any help would be appreciated.

Thanks

[$17mma]

Hi.


Also another quicky, it did occur to me after hearing you say that most people's debt is because of life changes, that if my hubby was made redundant, that we would instantly be in trouble. i could temp immediatley and get a good job but that would mean leavign my little ones earlier than i'd like. so i wondered if i should get some redundancy cover and if so what to look for. i hate throwing money away on empty insurance covers. i can't find anything in the book that covers this?

Any help would be appreciated.

Thanks

You should look into PHI cover. Check on the insurance thread for info

[JayD]

I have a question to ask, if I may please Martin?
How can those of us who prefer to have joint accounts with our spouses and partners get the best interest rates on our savings?
It seems that all of the online high interest savings accounts can only be opened in one name - there is no provision for a couple to open one jointly.
What are the best savings accounts for couples who don't want to split their savings in half and open two separate accounts? And why are the 'joint account' savings options so much meaner with their interest rates?

[johnwoodcraft]

Hi
I would like some advice please, Barclays have offered me a 12.5% regular savers account fixed for one year. This sounds very attractive, and appears to be out performing my ISA (5.3%). Is this as simple as it first appears, ie put money in barclays for a year then transfer to an ISA? or am i missing something important. I dont have a lump some to invest but i want to start regularly saving.

Thanks

John

[Paul_Herring]

Is this as simple as it first appears, ie put money in barclays for a year then transfer to an ISA? or am i missing something important. I dont have a lump some to invest but i want to start regularly saving.

Welcome John (noticed it was your first post)

If you don't have the lump sum, and you're saving from income, no, you're not missing anything. It's the best rate you can get for what you want to do.

(The problems usually cited with Regular Savers come when people have a lump sum to invest, and then complain they aren't getting "12.5% on the whole amount.")

[lipidicman]

Make sure you invest in your isa this tax year if you haven't done so. Then invest again as the new year starts. THEN use the reg saver to build up £3k for the next year.

The reg saver lasts only for one year, the ISA will be better if you are leaving it for the long term. If you dont use it, you lose it. Get it?

[annabob]

Hi Martin,

I was just in need of a little help regarding savings advice! I am finishing university this year and would now like to save money more seriously in order to put towards house buying etc. There was just too much of :beer: to get on with it before now! Are there any specific savings accounts I should look out for? I plan to save an amount each month so I thought a regular savings aco!!!! would be best, however I'm not sure on the best options!

At the moment I have a bog standard graduate account and a building society account, I'm in need of major updating! Thank you!!
:confused:

[Kazza242]

annabob - I hope you don't mind me replying to your question. Welcome to MSE.

The best place to start when saving is a mini cash ISA. As you are still at Uni you're probably not a taxpayer yet, but you will be soon. A mini cash ISA allows you to keep all of the interest that is generated from your money. Whereas, regular savings accounts and other savings accounts will deduct tax from the interest earned once you start working.

Savers are currently allowed to save up to £3,000 per tax year (April 6th - April 5th) in a mini cash ISA (increases to £3,600 from April 6th 2008).

Check out this article (http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1077487692,12362,) and this thread (http://forums.moneysavingexpert.com/showthread.html?t=401374) for mini cash ISA information.

After you have filled up a mini cash ISA a regular savings account is a good option. Check out this article (http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1108401263,93536,) and the Moneyfacts regular savings accounts list (http://www.moneyfacts.co.uk/savings/bestbuys/savings_regular.aspx) for account options.

The YBS account is a particularly good one because it doesn't sweep the funds out after 12 months like most regular savings accounts. It allows you to continue saving from £10 - £500 per month until your balance reaches £20,000 and pays a high rate of interest at 7.00%.

After regular savings accounts think about opening an easy access savings account (http://www.moneyfacts.co.uk/savings/bestbuys/savings_internet.aspx). The Icesave account is one of the best paying 5.70% interest.

[Beb48]

Hi

I have just sold my house and have moved into renatal accomodation to avoid a chain. I have £55000 that I want to save somewhere for 3 - 6 months (ideally tax free) would the fountain be the best option for me?

Also does anyone know if there is a limit on the money that can be moved before transfere fees are incurred

Thanks

[LittleWitch]

Hi,

I'm a bit of a money saving moron... I've never really understood banking or saving or pretty much anything to do with money (other than spending it and running up major debt, that I have down to a fine art). I'm about to sell my flat, mostly to pay of the above mentioned major debt, and will have about £18,000 left over thanks to the insane property pricing at the moment. I want to save the money but don't know what to do with it. The idea my parents and I have come up with is to put the money into savings and also to add to it every month with the disposable income I will now have after I moved home. Eventually the money will be used as a deposit for a new flat or house but I can't forsee needing the money for another year at the least.

So I'm lost and in need of guidance. Everyone has an opinion and they all disagree with the other. My parents think putting the money in a high interest savings account with 1 bank is the way forward whereas a friend of mine thinks that investing is the way forward as I won't make any money just by saving it. I understand that investing the money means I might come out with less than I put in which is something I'm not sure I want to risk.

Does anyone have any suggestions?

Thanks.

[jamesd]

Beb48, a high interest savings account is usually best for that unless you'll be leaving 3000 in the cash ISA afer the new purchase.

LittleWitch, cash ISA then regular saver accounts and finally high interest savings accounts is the way to go with that. You can use the 18,000 to fund the payments into the regular saver accounts, paying a total of ( 18,000 - 3000 ) / 12 = 1,250 a month into them. Any extra savings from income can go into the savings account that you ahve feeding the regular savers via a current account:

Salary + 15,000 -> savings account -> regular monthly payment to current account -> regular saver payments.

[emmamc252]

my biyfriend and i are buying our first house and as we both live at home currently we are more than a little nervous about bills etc as we really don't have any personal experince, we just have a rough idea from our parents predictions. for this reason we think we are going to get an interest only wortgage and save what we can each month towards a lump sum. we are looking at a 5year fixed rate mortgage as again we want teh stability. we expect to be able to save at least £200 a month as we aren't getting too high a multiple or anything. what sort of savings account would you recomend for this purpose? we have used isas for saving previously however we are looking at this as our safety net so that if heaven forbid something toally unexpected happens like the roof falls off the house, not that it should, but just in case, we would have the money there to take care of it without having to borrow more. neither of us have any debt, advice please!!!!!

[Jonbvn]

my biyfriend and i are buying our first house and as we both live at home currently we are more than a little nervous about bills etc as we really don't have any personal experince, we just have a rough idea from our parents predictions. for this reason we think we are going to get an interest only wortgage and save what we can each month towards a lump sum. we are looking at a 5year fixed rate mortgage as again we want teh stability. we expect to be able to save at least £200 a month as we aren't getting too high a multiple or anything. what sort of savings account would you recomend for this purpose? we have used isas for saving previously however we are looking at this as our safety net so that if heaven forbid something toally unexpected happens like the roof falls off the house, not that it should, but just in case, we would have the money there to take care of it without having to borrow more. neither of us have any debt, advice please!!!!!

Hi Emma,

I would recommend that you post this question in as a new subject/topic, rather than on the tail of a completely unrelated subject.

Anyway in answer to your question, since you are only saving £200 a month, ISA's will offer you the best return since they are tax-free. Hopefully, as time goes by and your income hopefully increases, you can consider a repayment mortgage and/or you can increase the amount saved.

HTH.