FirstDirect regular savings is actually max 2.7% ?? And not 6%??

anon_ymous

As above

I found a calculator here:

http://www.hl.co.uk/news/calculators/regular-savings-calculator

And I put in to the fields:

How much will you be saving each month?: £300

Time: 1 year

Growth: 6%



Looking at that, that's a £97.36 profit

Doing the maths, that's only a 2.7% return on your money.

ie:

£97.36/£3600 = 0.0270444444444444
0.0270444444444444* 100 = 2.70% AER

Course, if you had a lump sum of £3600 in there, you'd make £216, except of course regular savers tend to not let you save in a lump sum



Maths again:

£216/£3600 = 0.06
0.06*100 = 6% AER

Is the above correct? Would I only just get a 2.7% return?? Any help/clarification on the above would be appreciated

zagfles

You don't understand what AER means. Look it up.

anon_ymous

zagfles wrote: »

You don't understand what AER means. Look it up.

Thanks for being so condescending. I was trying to get some clarification, and I was confused. The forums are here for help.... How in hell was that helpful? Way to put potential people off from coming to this site...

zagfles

waqasahmed wrote: »

Thanks for being so condescending. I was trying to get some clarification, and I was confused. The forums are here for help.... How in hell was that helpful? Way to put potential people off from coming to this site...

OK apologies I was a bit curt. See http://www.moneysavingexpert.com/banking/interest-rates

Basically other than the first £300 the rest of the deposits won't be in the account for a full year, so don't get a full years' interest.

On average the deposits will be in for 6.5 months. So at 6% AER you'd expect to earn interest of 3600*0.06*6.5/12 = £117. After tax = £93.60. Not sure why the calculator is a bit more but may be because of different lengths of months (interest is worked out daily).

masonic

This misunderstanding comes up regularly, so tends to attract acerbic responses.

If you are saving £300 per month from income, then you are getting 6%. No different than if a savings account paid a rate of 6% and you put in £300 per month.

If dripping in a lump sum, you need to consider what the money is earning elsewhere to calculate *your* overall rate of return. Of course, you earn 6% AER on the money that's in the regular saver, but on average each deposit is only there for just over half a year.

anon_ymous

zagfles wrote: »

OK apologies I was a bit curt. See http://www.moneysavingexpert.com/banking/interest-rates

Basically other than the first £300 the rest of the deposits won't be in the account for a full year, so don't get a full years' interest.

On average the deposits will be in for 6.5 months. So at 6% AER you'd expect to earn interest of 3600*0.06*6.5/12 = £117. After tax = £93.60. Not sure why the calculator is a bit more but may be because of different lengths of months (interest is worked out daily).

masonic wrote: »

This misunderstanding comes up regularly, so tends to attract acerbic responses.

If you are saving £300 per month from income, then you are getting 6%. No different than if a savings account paid a rate of 6% and you put in £300 per month.

If dripping in a lump sum, you need to consider what the money is earning elsewhere to calculate *your* overall rate of return. Of course, you earn 6% AER on the money that's in the regular saver, but on average each deposit is only there for just over half a year.

Ahhhh. That explains a lot then! I'll probably "drip feed" some money in to accounts, but right now, I'm sorta taking advantage of all the current accounts lol.

jimjames

waqasahmed wrote: »

As above

Maths again:

£216/£3600 = 0.06
0.06*100 = 6% AER

Is the above correct? Would I only just get a 2.7% return?? Any help/clarification on the above would be appreciated

Why do you expect to be paid interest on money you've not put into the account?

The interest rate is 6% as they say but you only get paid interest on the money deposited.

Archi_Bald

waqasahmed wrote: »

Thanks for being so condescending. I was trying to get some clarification, and I was confused. The forums are here for help.... How in hell was that helpful? Way to put potential people off from coming to this site...

The response from zagflies wasn't condescending at all - it was spot on.

Analysis: You don't understand what AER means.

Help: Look it up. (May be a bit short but as it's easy to look up AER is was a valid suggestion).

Kendall80

It was short and to the point. A few others could do with exhibiting such brevity on occasion

Vortigern

Let's put this another way.
The rate is 6 per cent per annum
Your £3600 is not in there for a whole annum!

evenasus

jimjames wrote: »

Why do you expect to be paid interest on money you've not put into the account?

They're not alone in misunderstanding how interest rates work.

This poster thought they could make easy money from a 2Yr 4%ISA fed from 1year fixed saver on 11th hour of 1st year ISA anniversary.