Regular Savings Accounts

Robert_Sterling_3

Consider the fraction

26
65

If you cancel the common factor 13 it becomes

2
5

This is a correct method leading to the correct answer.

Whereas if you rub out the six in the numerator
and you rub out the 6 in the denominator just because there is a 6 on the top and a 6 on the bottom you are also left with the right answer but the method is wrong.

mary

You arrive at your £2.88 in month one by using a calculation which assumes that if the annual rate is 7% then the monthly rate is 7% divided by 12 which is 0.583333%
That is the wrong way to work out a monthly rate.
The actual monthly rate is  0.5654145%

Can you explain how you reached the 0.5654145% please?

Robert_Sterling_3

We talk about a monthly rate but really there is no such thing because months do not have a standard length.
A yearly rate of 7% gives a yearly multiplier of 1.07.
I will ignore leap years which are a different kettle of fish.

OK

Yearly rate multiplier  1.07
To get the daily multiplier find the 365th root of 1.07
Using a calculator speed up this calculation.
We use to do it using 7 figure log tables in the days of old.

As people love a nice fictitious monthly multiplier we can, although perhaps we shouldn't, extract the 12th root of the yearly multiplier. ( get a dentist to help if extracting the root is painful )

This comes to 1.005654125

to get the monthly rate

Subtract one

giving .005654125

Multiply by 100 to get a percentage hence  0.5654125%

Geddit?

Chris357

Martin advocates the benefits of drip-feeding into regular savings accounts but Anna Bowes of Chase de Vere says,

"If you are someone who has a lump sum sitting in a poor paying account, you are better off leaving it in an account that pays less interest but pays for the whole year, rather than drip-feeding it into an account paying a higher rate" (BBC Business).

Would Martin care to comment on this?

Robert_Sterling_3

The Chase De Vere rep got it wrong.
See "THE SUNDAY TIMES GOT IT WRONG in this forum.

Leia_Stephens

Abby are the better bet simply because they have shown a willingness not to screw over their existing regular savers

I appreciate that Abbey is being flexible and allowing current customers to "upgrade" to the higher rate, but Abbey doesn't allow changes in the amount of the standing order, which is inflexible.

Sooner or later I have to make a decision :-[: stick with H and sacrifise 1% interest, but have the flexibility to change my standing order (between £25 and £250 each month), or move to A.

Leia

Robert_Sterling_3

Savings accounts have different rates of interest and different terms and conditions.
We all have to make up our own minds as to what suits our own situation best.
For what is's worth I would stick with what you have already got but I am me and you are you.

essexrose

As mentioned by Cinders (Halifax Regular Saver thread) just thought I'd mention that when I opened my Halifax R.S. earlier this year my opening investment was higher than the standing order I then set up to make the monthly investments for the remainder of the year.

I don't know quite how much extra they would allow you to invest on day 1 (mine was 33.3% higher than the regular monthly amount, but still well within the monthly parameters) but anything extra has got to help - a good lump sum that then gains interest across the whole year makes even more use of a good rate of interest than just investing a set amount across 12 months.

dealseeker

As an alternative to 1 year regular saver account what about this account if you can save on behalf of your child.
Scarborough Building Society.
Max contributon £150 per month.
3 year term.
Guaranteed to be 1% above base rate (Current rate 5.75%.

As tax free (providing child does not earn more than £100 from your savings (£200 if 2 parents), then the interest is tax free. Equivalent to £9.5% for a higher rate tax payer 7.2% basic rate tax payer. Beats the 7% gross rate available with Abbey and Halifax and there is 3 year guarantee and option to make withdrawals.

Robert_Sterling_3

There are several tangled strands in the previous post.

First getting a good rate of interest.
OK 7% is better than 5.75%.

Whether 7% Fixed is better than 5.75% variable you decide.

If you want to open an account in trust for a child then do so.

For a child you can not only open an account which is restricted to children ... e g Nationwide's Smart Account but you can also open almost any other account too.

So again 7% Abbey is a front runner.

If the money has been set aside for a child I see no point in calculating what an adult paying 40% tax would need to get to be left with say 7% after 40% tax.