Lump Sum Saving & Regular Monthly Saving

colsten

AdamW85 wrote: »

Hi Nectar, thanks for that.

What I cannot get my head around though is why put all into one account (e.g. Santander 123) and earn just 3%, when I can move it between various current accounts and get potentially 6%?

Or am I missing something?

You aren't missing anything, you are spot on. The Santander 123 is an option for lazy savers who can't be bothered about getting the best return for their money. It's still a lot better than keeping £20K in PBs though :cool:

colsten

NectarCollector wrote: »

at some point I would start to forget to move money,

Excuse me, but there is no logic to your reasoning. If you manage to set up SOs and DDs for your 123, why can't you do the same for other accounts? Not that all other accounts even do need SOs and/or DDs, but there's a whole host that pay a lot better interest than a 123.

In most cases, the 123 is the lazy option for people who don't care how much / how little interest their money makes. In isolated cases, the 123 is also the option for people who don't know any better. In very rare cases, the 123 is the best choice.

AdamW85

Colsten, I have no issue setting up the various DD as required and making the SO into the accounts etc. As you say once they are set up I see very little management of them, unless closing or opening new accounts.

Eco Miser you say regular Savings accounts for the £1000 a month and current accounts for the £20000. I don't understand why not to put the money in the one with highest interest rates, which currently appear to be current accounts?

colsten

AdamW85 wrote: »

Colsten, I have no issue setting up the various DD as required and making the SO into the accounts etc.

I know you don't. It's some others that appear to have difficulties understanding the concept.

AdamW85 wrote: »

Eco Miser you say regular Savings accounts for the £1000 a month and current accounts for the £20000. I don't understand why not to put the money in the one with highest interest rates, which currently appear to be current accounts?

You are limited by the amount the account pays interest on. E.g. no point in putting £20,000 into a TSB Plus at 5%, as you only get interest on up to £2,000. You have to find a home for your remaining £18,000, and you may (will) not find a place that pay 5% on an £18,000 lump sum.

AdamW85

Ok I have put something together for my current lump sum saving. If my understanding of the concept is correct:

1. The minimum monthly pay in does not need to stay in the account. I.e. it can be deposited one day and then paid to another account the next, and so on
2. Only paid the advertised AER on the maximum balance. Anything above this does not earn interest

Link to image here as cannot post properly within they thread - w w w . postimg.org/image/d3518rzrr/

AER was calculated monthly as shown for each bank, then totalled for the year. Formula shown below, and hopefully my understanding of how they pay the interest is correct:

w w w . postimg.org/image/mz1c2mvfl/

The balance each month does not increase as I see no point in having more money in the account than is needed.

• So, am I not he right track, or widely misunderstanding?
• I have left the large sum in Santander 123 as don't see the point in spreading the 10.5k across multiple accounts that pay the same %. Good or bad choice?

I may will a look tomorrow evening and tie in some accounts that have decent paying regular savings attached, as this would be useful for my ~1k monthly saving.

• Lastly, what is best to do with the money that is accrued as interest monthly? Leaving it in is not efficient as does not earn any more interest (compound interest theory)

Whilst the average interest is not bad (gross shown in the image), I have read on here people getting~4&5%. Not sure how though!

ceredigion

might help
http://www.bankaccountsavings.co.uk/

YorkshireBoy

Some comments:

Your use of calendar months for interest is only true for Nationwide Flex (of the top payers). The rest pay either at the end of the first working day of the month (Lloyds, TSB, & BoS) or on the monthly anniversary of account opening (Santander & Tesco...but these will be loosely based on 31/30 days as per Nationwide).

Next year February will have 29 days.

You don't need to wait a day to transfer out. You can (should!) shift it same day.

If you've no, or few, qualifying cashback DDs on Santander your effective interest rate will be nearer 2.6% than 3% AER when the £5 fee is introduced next month.

When calculating interest, you may find it easier to use the gross p.a. rate (eg 5% AER is 4.89% gross p.a.), rather than messing around with powers and the like.

If you've no room left anywhere for the interest, then Tesco will pay you 3% AER on it.

Personally I wouldn't bother with Santander until I'd filled all the 'clean' 3% AER accounts first, eg BoS & Tesco (which would take £21K of 'sole' money).

colsten

Agree with YorkshireBoy's assessment.

Superscrooge

ceredigion wrote: »

might help
http://www.bankaccountsavings.co.uk/

Useful link! Not seen that website before.

Pity it doesn't appear to mention the regular savings accounts you can set up such as the 6% First Direct saver but other than that it is very useful.

colsten

ceredigion wrote: »

might help
http://www.bankaccountsavings.co.uk/

that's ok for the basics but it will not help with maximising your money through Regular Savings.

I think AdamW85 has advanced beyond the bankaccountsavings website already.