Help Me To Save For A House Please

mr_fishbulb

grumbler wrote:

:mad:
This is absolutely wrong!
Forget about second and third years. Diring the first year you get more interest with regular saver - without any doubts. With 10% regular saver and £250 p.m. you get about £162 gross; with 5.15% instant access and the same £250 p.m. you get just about £83 gross. Obviously it is better to use regular saver to save up to £3000 during a year. The same applies to the next year and next £3000 after the first £3000 (+ interest) were moved to some other saving account or ISA ...

Yeah you are right. I worked out a spreadsheet and everything but looked at the wrong figures!
£83.69 on instant savings
£162.50 on regular savings

Then on 2nd year (continuing £250 each month) it's
£321.88 on instant savings
£325.00 on regular savings + £8.37 if I had taken the interest from the first year and put that in an instant access savings. = £333.37

Then on the 3rd year (again continuing £250 each month) it's
£714.56 on instant access
£487.50 on regular savings + £16.74 interest on the interest from the 1st year + £8.37 interest on the interest from the second year. = £512.71

But as I don't plan to have it in there for 3 years, the regular saving is the best.

Except if the regular savings goes down to, say, 7% for the second year. Then the instant access would be the winner.

mr_fishbulb

grumbler wrote:

Current account pays 5% only on balance up to £2500 AFAIK ...

That's a good point. Cheers

mr_fishbulb

So I'm guessing it would be best to have a regular savings for the first year and then move all of that and the interest to an instant access for the second year and pay the £250/month into that? I think that works out at £409.06 interest that way.

tomstickland

In the second you'd be best opening another reg saver at whatever interest rate you can find that's better than 5%.

The thing about a reg saver is that the average amount of money in the account over the year is somewhere around half the final amount (6.5/12ths if you pay in at the start of each month), so the amount of interest earned is approximately half of the gross rate multiplied by the final amount. However, if you start with all of the money in an account paying 5% and pay into a 10% reg saver then your total interest for the year will be approximately 7.5% of the final amount saved in the reg saver.

mr_fishbulb

So using a regular saver depositing £250 a month is better than using an ISA also depositing £250 a month?

tomstickland

I'm not sure. Please be aware that I'm quite new to this myself.

I don't know enough about ISAs, so don't take this as gospel, but you can open a £3K mini cash ISA each year, and you're best off doing that first before going for taxed savings. Fill up your ISA allowance first. At the end of year one I think you can put the £3K in the reg saver into an ISA and then start on another reg saver. That way the previous year's £3K is tax free and the new money is at the maximum rate available.

grumbler

mr_fishbulb wrote:

So using a regular saver depositing £250 a month is better than using an ISA also depositing £250 a month?

Yes, as I explained in my post #2 here ...

mr_fishbulb

Thanks. I think I'm getting the hang of this.

For the past 2 years I've been travelling so all I've cared about is how quickly the money was going down. Now it's the other way around.