Could someone please help with this interest calculation (FD Regular Saver maximum)

Tunstallstoven

Hi all

I am thinking of switching to FD and as part of my decision I want to know what interest I would earn in a year if I were to use the Regular Saver account to it's maximum. The most you can put in is £300 a month. The interest is 5% AER/gross.

So if I were to put in £300 a month for a year, at the end of the year what would I have earnt in interest? I have tried to work it out myself but no joy.

Many thanks

Max

Ballard

There are more accurate calculations but if you just want a ball park figure it’s 5% of the rough average balance (£300 x 6) x 5% = £90.

The FD website probably gives a figure somewhere.

AirlieBird

I suggest you look at the Key Product Info

Ballard wrote: »

There are more accurate calculations but if you just want a ball park figure it’s 5% of the rough average balance (£300 x 6) x 5% = £90.

More accurate to multiply by 6.5 rather than 6.

Tunstallstoven

Thanks to both of you, I really appreciate the replies. I didn't see the Key Product Info so thanks for pointing that out as it gives the exact info I needed (£97.50 earnt in the year).

Cheers

colsten

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts?&_ga=2.147371319.1693788136.1511731061-1792643167.1435847652#calculator

okydoky

There is a more general way of doing this -

Calculate the interest for 1 month, in this case £300 * 5% = £15 divided by 12 = £1.25. Then always multiply this figure by 78, which equals £97.50

The multiplier of 78 is constant regardless of the monthly payment and interest rate.

It’s how I do it anyway👍

Tunstallstoven

Thanks for the additional info.

@okddoky - I'm sure I am missing something blazingly obvious, but what confuses me is that the calc is based on £300. But the account has more than that as the year goes on. I presume that's where the 78 figure comes in somehow?

I always was more of an arts man at school

okydoky

Yes, that’s where the multiplier of 78 comes in!

So month 1 is 1, month 2 is 1 + 2, month 3 is 1 + 2 +3 etc until month 12 gives you the 78.

This can be used for all combinations of monthly payment and interest rates, saves quite a bit of faffing about, just need to remember 78 and you are sorted👌

Tunstallstoven

Thanks for explaining

TrickyDicky101

If you want to dip into Excel then the FV function will calculate your future value after a year (this is the same calculation as the calculator linked to in colsten's reply above).

The 5% is an Annual Equivalent Rate so you need to de-compound for the monthly equivalent:

(In Excel formula speak):
=(1+5%)^(1/12)-1
=0.4074%

Then the full FV formula is as follows:

=FV(0.4074%,12,-300,0,1)
=£3,696.77

RG2015

And 78/12 = 6.5

£300 x 5% x 6.5 = £97.50

£300 x 5% / 12 = £1.25
£1.25 x 78 = £97.50