Saving calculations

rimrah

Hi
I have a couple of questions I'm hoping one of you expert savers can help me with

firstly, how is interest calculated? is it based on the actual number of days the money resides in the account in a given month? Or is it that as long as the money is there before the interest is calculated I can earn the full amount of interest

secondly, can anyone tell me the difference between having £1000 in ICI's HiSave (5.15%) account and investing the same amount in ING Direct at (4.5%) I have money in ING and should probably move it to ICIs HiSave but as I've been with ING for awhile and ICI is relatively new in the UK I'm a little reluctant to do so. the point is that for every £1000 in the HISave account how much extra am I saving compared to ING Directs 4.5%. My decision to move will be based on this amount, but I dont know the exact calc to work this out

many thanks and apologies if I'm reiterating earlier posts, I did have a look but couldnt find the info I'm after

Chrismaths

interest is calculated on the actual number of days you have money in the account. What you do is take the gross rate (not the AER) - ie 4.41% for ING, and divide by 365 days to get the daily rate. Multiply this by the number of days you have money there, and you end up with the gross interest in that month. So if you have £1000 in ING for 10 days, this earns £1000*10*4.41%/365, or £1.21 of gross interest. If you are a BR taxpayer, multiply this by 80% to get the net amount (£0.97). You can work out the difference between ING and ICICI for yourself.

When deciding if you want to move the money, remember that it will take 3 working days to get the money from ING to your linked account, and then another 3 working days to get it to ICICI, so with no bank holidays, you will lose 8 days interest. If you calculate how much this is at the ING rate, then work out how much extra interest you earn per day with ICICI, you will end up with a figure for the number of days you will have to leave the money with ICICI in order to make up the lost interest, from where you can decide if it's worth it.

HTH, Chris

rimrah

Chris

many thanks for the promt reply.

from your calc I get the following for 10k over 1 year:
10000* 365*(4.41/100)/365 = 441
10000* 365*(5.15/100)/365 = 515

So that means I'd get an extra 74 over the course of a year if i switch to Hisave

The loss in interest whilst transferring from Ing to HiSave is
10000*8*(4.41/100)/365 = 9.66

So total gain I think is 74 - 9.66= 64.33

Question is, is it worth it. To be honest I dont know but every little helps as I'm saving for a deposit on a house. The way house prices are I'll be saving for awhile yet.

thanks for answering my queries.

regards

grumbler

rimrah wrote:

from your calc I get the following for 10k over 1 year:
10000* 365*(4.41/100)/365 = 441

This calculation doesn't take compounding into account. Rate 4.41% gros p.a. can be used only to calculate monthly interest (4.41%/12) or daily interest. For yearly interest you should use AER that is 4.5% in your case:

1000*4.5%=450

Or, what is the same

1000*[(1+4.41%/12)^12-1]=450

Yes, difference is just £9, I just wont to explain you the importance of Annual Equivalent Rate.

richgirl

Theres a savings calculator here http://www.moneyforums.co.uk/savings_calculator.php, which you may find useful.

rimrah

thank you grumbler and richgirl.

i'm not 100% sure but the upshot is that the difference between switching between Ing direct and Hisave is roughly 300 (saving calc) for me over the course of a year. But I've been with ING for awhile and dont know too much about ICI. I'm drip feeding the ICI account at the moment to see how it fares over the coming months. so far I've had some technical hitches that doesnt fill me with alot of confidenece. I'll wait and see

thanks v. much for everyones help
rimrah