New saver questions

espruso

Hi,

I have decided that I want to put some money aside to keep for the future, and to pay in whatever I can each month without of course affecting my day-to-day living.

I bank with Santander, and I thought it would be quick and easy to transfer money to and from my current account if I had an online Santander savings account which they offer.

However, I do not understand the interest. The choice was to open the account with yearly interest of 2.80% or monthly interest of 2.76%. What is the difference between this? Which is better?

My income is below the personal allowance, so I would need to complete an R85, can that be done online too? (I'm a uni student - and please don't laugh that I want to save! It's only going to be a little each month but I think it's a sensible thing to do. Otherwise, I'd just spend it on new clothes all the time!)

I just don't understand what the interest is, and then the bonus interest of 2.30%? The account is the Santander eSaver Issue 7.

I'd be really grateful for any advice. I just want to save a little each month where possible and in the future use this money for something useful! I think this is good discipline!

Thank you.

espruso.

psychic_teabag

The difference is due to compounding : as long as you allow the monthly interest to accumulate in the account, you will start earning interest on the interest, and after a year you will end up with interest of 2.80% of the initial amount. Have a look at the AER - this should show the interest from saving for a year, and monthly and annual interest tends to be set such that both give the same AER.

http://www.moneysavingexpert.com/banking/interest-rates#AER

The bonus is just telling you that 2.3% of the 2.8% will vanish after a year, so that the interest rate will drop to 0.5%

Have a read of Martin's guides at http://www.moneysavingexpert.com/savings/savings-accounts-best-interest if you haven't already.

You might also consider an ISA : even though you don't pay tax, and so don't need the tax-free-ness, Santander's ISA is paying more than its non-ISA account.

innovate

espruso wrote: »

I'm a uni student - and please don't laugh that I want to save!

Only a fool would laugh at someone who is intent on building up some savings (little acorns and such stuff....it's all true!). So you just keep ploughing away, you are on a good road :cool:

Other than that, I can't add anything over what psychic teabag already said.