2009/2010 ISA Limits

chopperharris

citiation is listed somewhere on here and the numbers have been crunched by those better than I.

YorkshireBoy

chopperharris wrote: »

...the numbers have been crunched by those better than I.

Agreed. And every time they have they've proven that regular saving (both from income and the drip-feeding method) *is* beneficial.

LongTermLurker

chopperharris wrote: »

citiation is listed somewhere on here and the numbers have been crunched by those better than I.

Paying in from income doesn't need explanation, because clearly if I put my spare cash in a bank paying more interest, I'll end up with more interest.

If bank A pays you £60pa for every £1000 you have with them and Bank B pays you £120, forgetting compounding, that means bank A pays £5pm and Bank B £10pm.

Start with £12000 in Bank A and £0 in Bank B, and slide the money across £1000pm

Month ....Bank A bal ....Bank B bal .......... interest received
Jan.......... 11000 .......... 1000 ............... ..... 65
Feb.......... 10000.......... 2000.............. ...... 70
Mar.......... 9000 .......... 3000 ................ .... 75
Apr.......... 8000.......... 4000 ................ .... 80
May.......... 7000 .......... 5000 ................ .... 85
Jun.......... 6000 .......... 6000 ................ .... 90
Jul .......... 5000 .......... 7000 ................ .... 95
Aug.......... 4000.......... 8000 ................ .... 100
Sep.......... 3000.......... 9000 ................ ....105
Oct.......... 2000 .......... 10000 ................ ....110
Nov.......... 1000 .......... 11000 ................ .... 115
Dec .......... 0 ................ 12000 ................ .... 120
................... ................ .... ................ ........ .... ---
................... ................ .... ................ ........ ...£1110

If you'd left your money in Bank A for a year, you'd have received £12000 @ 6% for a full year = £720, but by dripfeeding it you would have earned a combined interest of £1110, or in other words 9.25% - it's not hard to understand that if you take a low number and a high number, the average will be higher than the low but lower than the high.

* The figures above are all for illustration purposes only and do not take any account of compounding or tax. The actual interest received by combining the accounts would be higher.