Santander saving vs First Direct regular savings account

Keenskier87

Hello,

I'm looking for some advice from someone with far superior maths skills than me.

I've just opened a Santander 123 account as I have £15,000 in savings and want to get the 3% interest rate. I'm also considering opening a First Direct account, as they'll give me £150 for switching from Halifax, and access to the regular saving account which has a 6% interest rate.

My question: I have about £500 to save every month, would I be better off putting this all in the Santander, and increasing the amount I'm getting 3% on, or should I put £300 a month in the First Direct (which gets 6%), and the remaining £200 in Santander?

Any help or advice would be appreciated, as I'm not ever sure how to do the maths for this!

Thanks

Herbalus

The maths is quite simple actually.

You can have £500 a month going into 3%.
Or you can have £200 a month going to 3% with the remaining £300 going to 6%.

The second option is clearly higher.

For concrete examples, £500 multiplied by 3% divided by 12 (12 months in a year) gives £1.25.

£200 at 3% gives £0.50, and £300 at 6% gives £1.50, so total = £2 per month.

Archi_Bald

You can use this calculator to figure out your return: http://www.moneysavingexpert.com/savings/best-regular-savings-accounts#dripfeed

You would certainly be better off to have some of your money in the Regular Saver, not least because you have to take a whacking £60 off the interest you can earn in Santander.

There are other current accounts that pay better interest than Santander, too.

Keenskier87

Thanks for the replies guys! That is what I was originally thinking, but someone confused me by saying that as the Santander account had more money in it it'd get more interest, even at a lower rate, than First Direct which would be higher but on a smaller amount (it being late at night is my only excuse for this rather fuzzy maths).

HappyMJ

Keenskier87 wrote: »

Thanks for the replies guys! That is what I was originally thinking, but someone confused me by saying that as the Santander account had more money in it it'd get more interest, even at a lower rate, than First Direct which would be higher but on a smaller amount (it being late at night is my only excuse for this rather fuzzy maths).

It will get more interest but you will also get even more if you use regular savings accounts.

£15,000 at 3% earns £450. Nice and easy.

£15,000 drip feeding £500 per month into regular savers ending the year at a balance of £9,000 at 3% earns £360. A lower amount than above.

£500 being increased each month by another £500 drip fed from the Santander account ending the year at £6,000 in the regular savers at 6% earns £195.

Add the 2 together and you get £555. An extra £105 over leaving it all in the Santander 123 account.

Open as many regular saver accounts as you can. First Direct, HSBC, M&S, TSB, Lloyds just to name a few.

firefox1956

You can only put a maximum of £3600 into the First Direct Regular Saver 6% account.
Maximum of £20000 in the 123 account.......NO interest at all on any amount over the £20000.

mgdavid

If you are keeping another account somewhere for all the usual bills etc I would put the whole £500 into FD every month; 300 for the Savings and 200 to pay the 2 DDs you need and get the cashback which helps to cover the monthly account fee.
Any surplus at the end of the month can be swept up into the 1-2-3 account (hopefully a bit more than £200)

Archi_Bald

mgdavid wrote: »

If you are keeping another account somewhere for all the usual bills etc I would put the whole £500 into FD every month; 300 for the Savings and 200 to pay the 2 DDs you need

what 2 DDs?

ceredigion

mgdavid wrote: »

If you are keeping another account somewhere for all the usual bills etc I would put the whole £500 into FD every month; 300 for the Savings and 200 to pay the 2 DDs you need and get the cashback which helps to cover the monthly account fee.
Any surplus at the end of the month can be swept up into the 1-2-3 account (hopefully a bit more than £200)

what account fee.