Regular Saver Interest

dancingfairy

O.k how can I compare the interest I would receive from a regular saver account with the interest I would receive from a normal account taking into account that in the regular saver account only the first months deposit would be getting the whole interest rate and the rest of it would be for the proportion of the year it's in there plus compounding? An easy way of estimating the interest rate would do? P.s I don't mind some maths formulas as I am a maths undergraduate student. I basically want to be able to compare accounts and make sure I can get the most interest possible.

Thanks

Milarky

The 'unsympathetic' response to this is: "It's the interest rate, stoopid! Wherever the interest is higher you earn more interest -where it isn't you don't"

But the more constructive approach is:

78/144ths times the higher (regular saver rate) plus 66/144ths times the lower ('feeder') account [78 + 66 = 144]

Allowing for the average transfer time (between different banks) of 3.5 days [trust me it works] or about 0.1 months then you would subtract about '1.2' [12 monthly payments times 0.1 months delayed] from the 'time in' the higher rate [in 144ths] that is something more like:

I]76.8 x higher rate[/I] PLUS [I]66 x lower rate[/I all over 144

Eg 8% from 4.5% feeder:

[76.8 x 8.0% + 66 x 4.5%]/144 = 6.33%

HTH

dancingfairy

o.k so I would be better off paying my money into an ISA (5.3%) than feeding my money from my current account (0% interest and 0% fee - using it to put money into savings account) to a regular savings account paying 6.3%?

I work it out as :

((76.8*0.063) + (66*0) )/144 = 0.0336 = 3.3%
compared to 5.3%?

p.s I don't pay any tax either - I should be so lucky to earn enough to pay tax!

chatty123

hi . if you go onto "www.this is money" and in the left column take tools and calculators and then long term savings you can the work it out....

richgirl

dancingfairy wrote:

o.k so I would be better off paying my money into an ISA (5.3%) than feeding my money from my current account (0% interest and 0% fee - using it to put money into savings account) to a regular savings account paying 6.3%?

I work it out as :

((76.8*0.063) + (66*0) )/144 = 0.0336 = 3.3%
compared to 5.3%?

p.s I don't pay any tax either - I should be so lucky to earn enough to pay tax!

If you have money sat in the bank then why not use a savings account to feed the current account that feeds the regular saver (if the savings account does not allow S/O's to external banks).

The regular savers can't be beat for none tax payers especially.

A good setup is say halifax websaver feeding current account that feeds an external regular saver, offcourse the websaver can feed the halifax 7% regular saver directly.

Milarky

dancingfairy wrote:

o.k so I would be better off paying my money into an ISA (5.3%) than feeding my money from my current account (0% interest and 0% fee?? - using it to put money into savings account) to a regular savings account paying 6.3%?

I work it out as :

((76.8*0.063) + (66*0???) )/144 = 0.0336 = 3.3%
compared to 5.3%?

p.s I don't pay any tax either - I should be so lucky to earn enough to pay tax!

In your case - the money being held at 0% prior to being paid in - you'd obviously benefit from being able to 'lump-sum' the full annual amount (assuming you have it) into an ISA at the start of the year. The second best option (assuming you can't afford to tie it up in an ISA for ever and must draw out your capital eventually, or after 12 months) is to use the ISA as the feeder account (assuming also it will let you do this) This formula would then look like


((76.8*0.063) + (66*0.053) )/144 = 0.0336 = 5.79%
compared to 5.3%

What you've identified is the 'dead money' problem with any regular saver account. When saving from income (i.e not transferring) however this is minimal - because you didn't hold the saved money until shortly before it was paid in. Where existing savings are being used to fund a regular saver account (which they very often are) common sense (and the above sums) dictate that you place these in the highest rate 'no notice'/easy withdrawal account you can for as much of the time [66/144ths] as you can't keep it in the higher rate regular saver [78/144ths, or a bit less]

Based on what you are saying an ISA option does look better. But do you have the annual amount to save in there 'now'?

Mr._H_2

dancingfairy wrote:

I am a maths undergraduate student.

You're a Maths undergrad and can't work it out for yourself? Eek! Maybe you chose the wrong course

Dagobert

You will find the formulae here:
[thread=88658]when a regular saver is worth it:[/thread]