Someone to work out my maths please

Sweetcheeks_3

I have £500 sitting in the Halifax high interest saving account. I havent a clue how to work out compound interest so can someone tell me how much I will be gaining in interest in a month please?

blinko

do the following, interest rate divided by 12.

eg 5%/12 = monthly rate then

1000 x (1.0monthly rate)*how many months

eg
5% a year interest rate = 2 years compunded
1000 x (1.05)*2 = 1102.50

by the way what monthly saver do u have with halifax the esaver is the best savings they have, along with the 7% which isnt good for lump sums.

so i would definately consider looking around

MarkyMarkD

I didn't understand blinko's answer.

You don't need to know anything about compound interest to work out how much you earn per month.

If the account pays 5% per annum, it pays 5%/12 per month which is around 0.4167%.

So on £1000 you would earn £4.17 per month; on £500 it's £2.08 (near enough).

You only need to know about compound interest if your interest is paid monthly and compounded - which it isn't in your case IIRC - and even then it will make buttons of difference on a £500 balance.

Walletwatch

To add to what Marky's said, I think you are referring to the Halifax web saver paying 4.9% AER. This would mean that for a balance of £500 for a year, you would get £24.5 in interest. To get what you earn monthly, you just divide this amount by the number of months (24.5/12) to get the same result of £2.08.

Sweetcheeks_3

Sorry if I confused you but I am refering to the Halifax Regular Saver 7.07%. I do have the websaver but only because I had to, to open the account.

Walletwatch

Sorry if I confused you but I am refering to the Halifax Regular Saver 7.07%.  I do have the websaver but only because I had to, to open the account.

Presumably, you have then decided upon the amount that you are going to be investing on a monthly basis into your Regular saver for a year. The way you would calculate the interest would still be the same:

P*N*r/36500

where P is the principal amount, N the number of days, and r the rate of interest.

For a regular saver, assuming you are investing £500 per month, you would apply this formula twelve times - for 365 days for first £500, 334 days for the next £500 and so on, and then total your results to get the interest that is due to you, and then adjust it for tax.

An approximation is that the mean amount that would be deposited for the whole year is (500*12)/2 = 3000, so the interest at 7.07% is calculated as a gross figure of 3000*7.07/100 = £210. Best to check with the Bank and get the exact amount of interest that you can expect at the end of the year.

Sweetcheeks_3

Well at the time I opened it, I was planning on putting in £200 a month, however, my finances dramatically took a turn for the worse and last month I was only able to put in £100 a month. I have in £500 at the moment, and I might have to drop my standing order even lower, but I wont be drawing on the capital and want to keep it going for the rest of the 12 months...... So thats why I was banking on that figure, even though I am hoping to put in the at least the minimum needed to keep the account open over the next 7 months.

I do love my ING account, I have been thinking of transfering my money out of there to put in the Halifax, but dont like the idea of having no interest in the days its 'lost' between accounts if you know what I mean.

Milarky

Opps! I think walletwatch has forgotten that the average balance is going to half the total invested for the Regular Saver Account

Therefore, just take your fixed monthly payment [whatever it is] multiply this by 6 and multiply this by 7.07%. However you probably also pay tax at basic rate too - if which case multiply this by 80% to give your net interest for 12 months

eg £250 per month for 12 months:

Net interest = £250 x 6 payment x 7.07% AER x 80% = £84.84

NB You might get a bit more if your payments reach the account earlier in the month than mid-month

EDIT [sorry, I just spotted your latest reply]

AFAIK, you can drop your standing order regular amount and still stay on the 7.07 rate. Assuming this to be the case, you will have put in £400 for an average period of 11 ¹/₂ months by the time the account matures. On the rest [10 payments of £100] you will have had a further £1000 on deposit for an average of 55/12ths of a month - or 55/144ths of a year.

Therefore

Payments 1-2  : £400 x [11.5/12] x 7.07% x 80% = £21.68

Payments 3-12: £1000 x [55/144] x 7.07% x 80% = £21.60

So I estimate your 'net' interest ought to come out at around £43.28

HTH

Sweetcheeks_3

LOL I think we cross posted!!!

I have worked out the answer now from your help thanks. I should have realized it was more straightforward than I thought.

Walletwatch

Opps! I think walletwatch has forgotten that the average balance is going to half the total invested for the Regular Saver Account

Therefore, just take your fixed monthly payment [whatever it is] multiply this by 6 and multiply this by 7.07%. However you probably also pay tax at basic rate too - if which case multiply this by 80% to give your net interest for 12 months

eg £250 per month for 12 months:

Net interest = £250 x 6 payment x 7.07% AER x 80% = £84.84

NB You might get a bit more if your payments reach the account earlier in the month than mid-month

Milarky

Haven't forgotten to halve the average balance - my post assumes a monthly amount of £500 (which would be wrong for a Hfx regular saver admittedly, as the max amount is £250)

My response, however, is correct so far as the calculations go.

Sweetcheeks_3

............... and your all stars :-*