Reg. Savers 5%

AndyPK

AndyPK wrote: »

using the formula on previous page I get

£78
£40.62


But these seam too high

seam too high though ?

AndyPK

using TSB as an example.

2% £250/month.

The website says I would earn £28.33

Your formula suggests £32.50

adindas

AndyPK wrote: »

yes I was just looking at the lloyds website

2.5% £250 a month
3% £400 a month (club lloyds customers)

Could someone tell me what they would earn in a year please, maxed out.

1. £75 ish ? for the 3%
£35 ish ? for 2%

You could do it yourself using this calcualtor
https://www.moneysavingexpert.com/savings/best-regular-savings-accounts

But I have done this for you
1. After saving £75.00 a month for 1 year and 0 months, you will have £914.56 in savings, meaning you've earned £14.56 interest
2. After saving £35.00 a month for 1 year and 0 months, you will have £424.54 in savings, meaning you've earned £4.54 interest

ValiantSon

redux wrote: »

You weren't comparing like with like.

You said the interest in £3000 for a whole year in the lower interest account is more than the interest on the regular savings account.



It's true in itself, but the reason for the difference is you are talking about 2 people with different availablity of money.

Someone who has monthly income gradually increasing their savings should go for the regular savings account, because some of these have the higher interest

With account availability as they are, someone who has a lump sum already would be best off with decent interest on the lump sum, gradually transferring to higher interest.

Your remark that the interest is more on 1.4% ordinary than 2.25% regular savings sounded like you were negating that, even if you didn't mean to.

I don't know why these two numbers are floating around anyway. Higher rates than that are available.

I don't think anyone mentioned yet that some regular savings accounts have actually increased rates. Bank of Scotland Halifax and Lloyds are all 2.5% for new accounts now (dont know when this started) and the Club Lloyds is 3%, so anyone at Lloyd's could have 2% on the current account and up to £650 a month added at average 2.8%.

You interpreted what I wrote to mean something, but that wasn't what I actually wrote.

AndyPK

thanks for the calc link.

It matches the formula on the previous page.

TSB must be assuming a bit of setup time I guess

YorkshireBoy

AndyPK wrote: »

TSB must be assuming a bit of setup time I guess

TSB tell you EXACTLY what assumptions they made in order to arrive at that figure, eg opened on 1st March and funded on 25th of each month following.

enjoyyourshoes

Compound interest is interest on interest, so if you have an (APR) interest bearing account, the first years interest has interest applied in the second and subsequent years.

Therefore the more years you can save without touching the money , the more interest you will make.

redux

ValiantSon wrote: »

You interpreted what I wrote to mean something, but that wasn't what I actually wrote.

This is what you actually wrote:

ValiantSon wrote: »

It depends what the .xx% is, but if it is 2.25% (as the OP indicates) then yes, 1.4% in an easy access savings account would be better on the total sum than the regular saver would be, e.g. £250 p/m at 2.25% = £36.44, whereas £3000 at 1.4% over 12 months = £42.

As I say, you aren't comparing like with like, as these are different scenarios for the amount available and when, and furthermore the person with the £3000 lump sum at the start could use both accounts to make more than either of those numbers, about £55.

In other words, you give one hypothetical example which nobody would/should actually follow; it is not better.

redux

YorkshireBoy wrote: »

TSB tell you EXACTLY what assumptions they made in order to arrive at that figure, eg opened on 1st March and funded on 25th of each month following.

It seems an odd example to specify. More ambitious would be to open the account on the 25th (or even 28th-31st) and make monthly payments on the 1st.

Edit: that said, if the money is there already, no point waiting until near the end of the month.

A family member, whom I help with online stuff, has a couple of accounts maturing on Feb 28th. Maybe I need to set a reminder alarm, though I might rephase one to start 2 or 3 months later.

redux

enjoyyourshoes wrote: »

Compound interest is interest on interest, so if you have an (APR) interest bearing account, the first years interest has interest applied in the second and subsequent years.

Therefore the more years you can save without touching the money , the more interest you will make.

Whilst this is true, many of these regular savers are now one year fixed term, and interest paid annually, so it doesn't apply.

For low rates of interest the compounding effect doesn't make a huge difference unless it goes on for many years. But it is there. For example about 50 not about 70 years to double money at 1.4%.

Someone earlier suggested making a spreadsheet for calculating compound interest, but actually it can be done on simple calculators.

(1 + x) ^ n, where x is the interest as a decimal fraction, i.e. 0.02 for 2%, so for example 1.02^5 = 1.10408, or 1.07^10 = 1.1967

Only if there are both an initial sum and regular savings does it get more complicated, and then I use an online monthly savings calculator.