Dripfeed explained

Tomk

Hi moneysavers,

Can somebody help me with my understanding of dripfeed?

I have all my money tucked away into the highest interest paying accounts. I have maxed my ISA allowance and the rest is in a high interest paying acount.

What is the benefit of paying in my regular saver from my savings account and then replace that from my salary (as I have a set amount I save each month) instead of putting it directly to the regular saver.

Surely it makes no difference as the sums at the end of the day are the same.

Example 8000 in savings account. 250pm into regular saver, 250pm put aside from my salary.

Dripfeed: Savings 7750 -> 250 reg saver, 250 from salary -> 8000 savings
Non-dripfeed: Savings 8000, 250 from salary -> 250 reg saver.

Surely it makes no difference.

Am I missing something?

sloughflint

Your understanding is correct. If you have spare monthly income that doesn't require access, that should go into a RS.
You could however maximise interest by dripfeeding some of your already accumulated savings in RS accounts leaving some available for easy access.

Lansdowne

I can think of several reasons someone (not necessarily you) might want to do every month
A -> B 250 and B -> C 250 rather than the simpler A -> C

First: the accounts A,B,C might be such that A->B and B->C can be done online but A->C can't.
Second: your salary might vary, and the amount you want to put aside that month might vary, but the maximum C will accept is 250pm. (This is what I do)
Third: to time the transfers to avoid the dodgy month end trap (to be explained later)
Fourth: account B may be a current account that pays interest if you pay in at least £x00 pm and the £250 helps that.
There may be others.

To explain the dodgy month end trap, mentioned before on this board:
The Regular Saver account only gives a high % rate if you deposit a certain amount every month. Otherwise it reduces to a pitiful rate. What is meant by "month" may not be clear in the terms & conditions but assume it is a calendar month.
If I am paid my salary on the 28th of each month, I might set up my Regular Savings transfer to go out of the bank on the 29th. If, one month, the 29th is Saturday the money may not reach the Regular Savings until the 1st of the next month meaning that the B society (e.g. Yorkshire or Britannia) might then claim a month was missed and refuse to pay the full interest.

Mikeyorks

Tomk wrote: »

Surely it makes no difference.

Depends on your 'savings account'? If you keep it as easy access then you're likely to get a lower rate than putting it into a good paying fixed term deposit .... and then paying the RS from current income.

Otherwise you're right - no material difference.