how to calculate interest earned ???

dazza001 wrote:

Hello Everybody

I am pretty useless at this kind of thing and I am hoping that some kind number wizz could give me a rough idea of how much interest I will earn on an Egg savings account that I have just opened for my wedding in June 2006.
I am puuting £100 a month away which will give me 18 months at £100.

The Egg account says that it pays 5.50% Gross PA.

So does this mean that I get 5.50% of 1800 at the end of 18 months or what, I am just not sure.

In anticipation of your help

Thanks

First off - do you pay income tax? If so, the gross rate won't apply to you as you will have to pay tax on your interest.

If you do get your interest gross, I think this is about right:

Year 1:
Average amount in account over 12 months = £600
Interest = £33

At the end of year 1, the interest is added to the account.

Start of year 2:
Start with £633 in account.
Average in account over 6 months = £300 + £633 = £933
Interest = £25.70

Total interest = £59, or so.

Someone please tell me if this isn't right!

I did some calculations for you, as you cant do "the average amount" or "you get half over six months" stuff, it doesnt work for compound interest (its a rough approximation)

I've just realised tabs dont work here -so this looks a bit confusing!

Egg A&L
'monthly multipliers'*
1.055^(1/12)= 1.004471699 1.0535^(1/12)= 1.004352608
1.0475^(1/12)= 1.003874685
+deposit +interest
1 100.00 100.45 1 100.00 100.44
2 200.45 201.34 2 200.44 201.31
3 301.34 302.69 3 301.31 302.62
4 402.69 404.49 4 402.62 404.37
5 504.49 506.75 5 504.37 506.57
6 606.75 609.46 6 606.57 609.21
7 709.46 712.21 7 709.21 712.29
8 812.21 815.36 8 812.29 815.83
9 915.36 918.90 9 915.83 919.82
10 "1,018.90" "1,022.85" 10 "1,019.82" "1,024.25"
11 "1,122.85" "1,127.20" 11 "1,124.25" "1,129.15"
12 "1,227.20" "1,231.96" 12 "1,229.15" "1,234.50"
13 "1,331.96" "1,337.12" 13 "1,334.50" "1,340.31"
14 "1,437.12" "1,442.69" 14 "1,440.31" "1,446.58"
15 "1,542.69" "1,548.66" 15 "1,546.58" "1,553.31"
16 "1,648.66" "1,655.05" 16 "1,653.31" "1,660.50"
17 "1,755.05" "1,761.85" 17 "1,760.50" "1,768.17"
18 "1,861.85" "1,869.07" 18 "1,868.17" "1,876.30"

Doing the calculation this way you see that the six months bonus counts a little more as it is compounded (ie better at the start than at the end as you earn interest on the bonus) Another way of looking at it is that if you change now you will probably lose more interest than you gain (in transfer days with no interest).

*The sharp amongst you will notice I have calculated a monthly multiplier which is a bit silly as each month is a different length - but that is just getting picky

The best suggestion was to use one of the 7% regular savers, though the abbey closes on the 29th. In your case the halifax one will do nicely, then use the egg (with bonus) for 6 months

this would look like

1.07^(1/12)= 1.005654145
1.055^(1/12)= 1.004471699
+deposit +interest
1 100 100.5654145
2 200.5654145 201.6994406
3 301.6994406 303.4052931
4 403.4052931 405.6862052
5 505.6862052 508.5454286
6 608.5454286 611.9862329
7 711.9862329 716.0119066
8 816.0119066 820.6257565
9 920.6257565 925.8311084
10 1025.831108 1031.631307
11 1131.631307 1138.029715
12 1238.029715 1245.029715
13 1345.029715 1351.044282
14 1451.044282 1457.532916
15 1557.532916 1564.497734
16 1664.497734 1671.940867
17 1771.940867 1779.864453
18 1879.864453 1888.27

The most extra you will get is ~£19 (over leaving it with egg) and again transfers will cost you a bit)

Basically, you have a good rate! so you can sleep easy