We'd like to remind Forumites to please avoid political debate on the Forum... Read More »
We're aware that some users are experiencing technical issues which the team are working to resolve. See the Community Noticeboard for more info. Thank you for your patience.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
Failing to understand appeal of regular savers
Options
Comments
-
I don't think it's really fractal, per se. I guess there is some self similarity because the derivative is proportional to the function? Erm, I'm not sure... I don't think that counts as fractal.
So if X is how much money you stick in at time t=0 (time measured in years), at annual interest alpha (in our case = 1.06), then at time t your original X is now worth
X * alpha^t.
For the total, you'd just sum up over the different X and different t.
Now I am confused about why banks don't do this, because that seems pretty inexpensive to calculate (but I don't actually know how long it takes to calculate e^x to decent precision, i.e. how fast does the Taylor expansion converge)
I can't quite make my mind up whether you have some mathematical knowledge but not enough to grasp the whole picture or you're simply posting garbage for your own enjoyment but I'm bored of it now.0 -
Half term?0
-
I don't think it's really fractal, per se. I guess there is some self similarity because the derivative is proportional to the function? Erm, I'm not sure... I don't think that counts as fractal.
So if X is how much money you stick in at time t=0 (time measured in years), at annual interest alpha (in our case = 1.06), then at time t your original X is now worth
X * alpha^t.
For the total, you'd just sum up over the different X and different t.
Now I am confused about why banks don't do this, because that seems pretty inexpensive to calculate (but I don't actually know how long it takes to calculate e^x to decent precision, i.e. how fast does the Taylor expansion converge)
I think you are way overthinking this.
We've been talking about theoretical cases where the periods are all the same and the frequency of deposits are all the same.
In the real world of the bank account there is no consideration of working out the compound interest. All they do is work out the interest payable at the end of each period and credit that to the account. At the end of the following period they will work out the interest due in that period based on the balances in the account during the period - no reference to how much interest was credited last month.
Remember that in the general case the account might have any number of credits or debits during the month so it's not as simple as taking the opening balance and adding a "period"'s worth of interest.
I imagine that the banks program is doing something along the lines of...- find the closing balance on each day of the period and sum them together
- calculate the average balance during the period
- calculate the interest payable as the avg balance * number of days * daily interest rate%
sum of each day's closing balance * annual interest rate / days in year0 -
Banks don't average out balances for a period. The interest will accrue on the closing balance each day and will settle on the interest payment day.
On the off chance that anyone is interested: On systems that I've used there are a couple of fields on the account record. One for credit interest and another for debit. Every day the interest is calculated, the field is updated and an entry is passed for the days accrual between the banks internal account for 'accrued interest' and a P&L account. When the interest is settled an entry is passed between 'accrued interest' and the customer's account.0 -
I can't quite make my mind up whether you have some mathematical knowledge but not enough to grasp the whole picture or you're simply posting garbage for your own enjoyment but I'm bored of it now.
>99.9% probability I have more mathematical knowledge than you.
Also kind of posting garbage. But I'm genuinely really surprised that no one finds this interesting.0 -
Banks don't average out balances for a period. The interest will accrue on the closing balance each day and will settle on the interest payment day.
On the off chance that anyone is interested: On systems that I've used there are a couple of fields on the account record. One for credit interest and another for debit. Every day the interest is calculated, the field is updated and an entry is passed for the days accrual between the banks internal account for 'accrued interest' and a P&L account. When the interest is settled an entry is passed between 'accrued interest' and the customer's account.
Interesting. I guess I don't know what "accrue" means: do you mean they just keep adding to a total, I guess in the "debit/credit interest" field? Is the accruing done linearly (i.e. each day you get (annual interest percentage*balance)/365?)
What is a P&L account? I don't know what
"an entry is passed for the days accrual between the banks internal account for 'accrued interest' and a P&L account"
means.
I guess I'm not sure what you mean by "passed".
I guess when the interest is settled the"debit/credit interest" field is added to the customer's account, then the "debit/credit interest" field is set to zero again?
I am surprised they do it like this. Very interesting!0 -
Interesting. I guess I don't know what "accrue" means: do you mean they just keep adding to a total, I guess in the "debit/credit interest" field? Is the accruing done linearly (i.e. each day you get (annual interest percentage*balance)/365?)
What is a P&L account? I don't know what
"an entry is passed for the days accrual between the banks internal account for 'accrued interest' and a P&L account"
means.
I guess I'm not sure what you mean by "passed".
I guess when the interest is settled the"debit/credit interest" field is added to the customer's account, then the "debit/credit interest" field is set to zero again?
I am surprised they do it like this. Very interesting!
Instead of guessing you should do some research and thinking and then start dealing with facts - you will find life easier in the longer term.The questions that get the best answers are the questions that give most detail....0 -
I will stand corrected, but it seems to me that some people have been educated far beyond their ability.
In answer to the OP’s original post…..
"Failing to understand appeal of regular savers"
My answer….
They give me more dosh.
For those less educated than me, I have provided links below.
I hope that they are of help.
https://www.google.co.uk/#q=they+definition
https://www.google.co.uk/#q=give+definition
https://www.google.co.uk/#q=me+definition
https://www.google.co.uk/#q=more+definition
https://www.google.co.uk/#q=dosh+definition0 -
Banks don't average out balances for a period. The interest will accrue on the closing balance each day and will settle on the interest payment day.
On the off chance that anyone is interested: On systems that I've used there are a couple of fields on the account record. One for credit interest and another for debit. Every day the interest is calculated, the field is updated and an entry is passed for the days accrual between the banks internal account for 'accrued interest' and a P&L account. When the interest is settled an entry is passed between 'accrued interest' and the customer's account.
Thanks Ballard - makes sense so "my" formula should be changed tosum of (the day's closing balance * annual interest rate / days in year)And obviously the bank would want to accrue (ie keep track of) how much interest has been earned but not yet paid as their liability (to their customer) has increased. (we are talking current/saving accounts here)0
This discussion has been closed.
Confirm your email address to Create Threads and Reply

Categories
- All Categories
- 351K Banking & Borrowing
- 253.1K Reduce Debt & Boost Income
- 453.6K Spending & Discounts
- 244K Work, Benefits & Business
- 598.8K Mortgages, Homes & Bills
- 176.9K Life & Family
- 257.3K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.6K Read-Only Boards