Regular Savers, a waste of time...

Mr_K

I've come to the conclusion that Regular Savers are a waste of time. For example, I had one with the HSBC at 10%. I put the maximum £250 in a month for a year and came out with £3,128 (£128 interest). I was dissapointed with this but understand how interest on these these accounts work. (If I'd put the £3K in a 6% saving account for the year I'd have got more and been able to withdraw/deposit as needed).

The headline interest rate is largely irrelevant, more important is the amount you can put in each month and the term of the account. I'm sure a lot up people must sign up to these 'dazzled' by the interest rate. Banks should also publish exactly how much you'll get at the end...

I suppose they might be useful if you're saving for something but I won't be using them again.

masonic

Are you not forgetting you are earning interest on £2750 outside of the regular saver in the first month, interest on £2500 the second month etc...? If you use a regular saver combined with a good instant access account, you do a lot better overall than just holding the money in an instant access account.

I agree a lot of people seem to get misled about exactly how these accounts work, but that doesn't make them rubbish.

LittleVoice

If you had put £3K in at 6% for a year, you would have received £180 interest before tax.

If you had put the £3K into an account paying 4% (easily done) and drip fed to your HSBC regular saver, you would have got £60 from that account as well as the interest from the regular saver.

Did you actually have £3K at the beginning of the savings year and leave it earning no interest at all while you fed money into the regular saver?

PParka

I see your point, but the trick is......

Put the £3k into the 6% savings account at the beginning.
Then transfer £250 a month into the 10% regular saver.

You'll still get the £128 interest from the regular saver, but you'll also get interest from the money in the 6% savings account.

Add the two together and you're better off than only using a 6% savings account.


EDIT: Looks like everyone else thinks the same as well!!

LittleVoice

So that's 3 votes for and 1 against then.

Mr_K

masonic wrote: »

Are you not forgetting you are earning interest on £2750 outside of the regular saver in the first month, interest on £2500 the second month etc...? If you use a regular saver combined with a good instant access account, you do a lot better overall than just holding the money in an instant access account.

I agree a lot of people seem to get misled about exactly how these accounts work, but that doesn't make them rubbish.

Yes, I see your point. But you'd have to be very organised with your money (most people aren't). My 'funding money' was in an HSBC current account so it was earning zilch interest there.

Just_landed

To give you an example £500 down £250 a month for 23 months @ 8% returned me £556.00 gross never mind the interest from where it came from.

masonic

Mr_K wrote: »

Yes, I see your point. But you'd have to be very organised with your money (most people aren't). My 'funding money' was in an HSBC current account so it was earning zilch interest there.

They're designed for you to save from your income, so yes, if you want to use them with a lump sum, you do need to be more organised.

apt

Also a lot of people save out of their monthly salary. But I do agree that despite the high headline interest rate it's more a good way of building up capital than earning a massive amount of interest. The Barclay saver at 7.75% will get you about £100 interest after basic rate tax.

Mr_K

The other major con is that your money is 'tied up'. If you need it, good bye Regular Saver (or at least those were the terms with the HSBC). I can see how they might be useful for some people but I'll be sticking to an instant access account.

Lavendyr

If you're in a situation where you need access to that money, I agree regular savers are not ideal. But as part of an overall savings portfolio, they can be very good. I have several savings accounts, some of which are easy access (should I need the money for an unforeseen situation), and others of which are limited access only (including my regular saver). It helps me put money aside from my salary each month, and I get a higher return on that money than I would just putting it into an easy access account each month.

You just need to understand how the accounts work - many people seem to get disappointed in their return because they think they're going to get X% on the total sum deposited, forgetting that the total sum is only actually in there for one month. But if you use them sensibly (i.e. paying money in straight from your monthly salary, or drip-feeding across from a high-interest savings account) they work really well.

I have to say that in the case in point for the original poster, the flaw does not appear to be with the regular saver itself, but simply that it was not the right product for the poster's needs, and simply looking into the product in more detail to begin with would have highlighted this.