How many Regular Savings Accounts do you have?

Willing2Learn

JohnRo wrote: »

If you have £3000 in a 1.2% account it will earn more interest than a 2.5% RS account will because the premise is that the throttled cash outside the RS is earning no interest.

In that example, you would use the 1.2% account as the feeder for the 2.5% RS account

EachPenny

JohnRo wrote: »

You're misunderstanding, I'm comparing them in isolation.

If you have £3000 in a 1.2% account it will earn more interest than a 2.5% RS account will because the premise is that the throttled cash outside the RS is earning no interest.

Call it an academic exercise or barking mad, I don't care.

Leaving a significant sum of money somewhere it is not earning interest for a significant period of time is "barking mad". On that we can agree.

You are correct in terms of your academic exercise, but not when it comes to practical application of a strategy to maximise the interest you can earn on a sum of money.

surreysaver

JohnRo wrote: »

You're misunderstanding, I'm comparing them in isolation.

If you have £3000 in a 1.2% account it will earn more interest than a 2.5% RS account will because the premise is that the throttled cash outside the RS is earning no interest.

Call it an academic exercise or barking mad, I don't care.

So what will you be doing with the £2,750 in the first month that isn't in the Regular Saver?

JohnRo

I've dug a very deep hole for myself that's about all I can say.

But it doesn't wait around doing nothing (unless under your matress).

That's the assumption I've been using in the interest earned comparison.

I know it isn't the case in a real world situation and shouldn't have posted but that's nothing new. A combination of both account types is clearly the best of both worlds and only sensible option.

gingercordial

JohnRo wrote: »

You're misunderstanding, I'm comparing them in isolation.

If you have £3000 in a 1.2% account it will earn more interest than a 2.5% RS account will because the premise is that the throttled cash outside the RS is earning no interest.

Call it an academic exercise or barking mad, I don't care.

It might be one of them but I won't comment as to which...

Regular savers work best when people are doing one of the following:

- Saving money as they earn, so they didn't previously have the £250 they're putting into the RS this month. It hasn't been sitting somewhere at higher interest until now. They hadn't earned it yet. So putting it somewhere it will earn 2.5% (or whatever) from today until the maturity date is the best thing they can do with it.

- Having money sat in an interest-bearing feeder account which is earning interest at, say, 1% and then moving £250 over to the 2.5% RS each month. It is still better to do that than to ignore the RS and leave it at 1% all year.

- Having 12 RS accounts (or more), maturing at one a month, and using those maturing funds to make the next month's suite of RS payments. All that money effectively rolls along earning 2.5% every day regardless of where it is.

Where this "doesn't work", or rather that person could refine things to work better, is if:

- Money sits in a feeder account at 3% and is moved to a 2.5% RS each month, which is of course at a lower rate. Same goes for situations where people have not maxed out the high interest-bearing current accounts on offer yet.

- Money sits as a lump sum of £3,000 earning no interest at all until it is put into a RS, in which case that person would be wise to figure out where they can put it until it can be drip-fed across.

Those of us with many RS accounts are doubtless doing some combination of the first three. I'm putting in somewhere in the region of £5k/month into RS. Some months I have two RS maturing so that easily funds this month's contribution. Some months I have one or none maturing and so I need to fund the contribution from my lower-interest holding accounts and/or from what I'm saving from my wages that month. I don't take from my higher interest current accounts for this.

I have about £60k currently sitting in RS accounts all told. It all circulates round and all earns my weighted average return all year. Comparing it to having £60k on day 1 and having to drip-feed that into an RS all year is just apples and oranges.

masonic

JohnRo wrote: »

You're misunderstanding, I'm comparing them in isolation.

If you have £3000 in a 1.2% account it will earn more interest than a 2.5% RS account will because the premise is that the throttled cash outside the RS is earning no interest.

Call it an academic exercise or barking mad, I don't care.

£3000 in a 1.2% account would earn £36 over the course of the year
£3000 in a 1.2% account being drip-fed into a 2.5% RS would earn approx. £16.50 while in the 1.2% account and £40.50 while in the RS = £57 in total.

The amount will vary slightly depending on the exact rules of the RS and day of the week/month in which it is opened

EachPenny

JohnRo wrote: »

I've dug a very deep hole for myself that's about all I can say.

No problem, we all do it sometimes.

JohnRo wrote: »

I know it isn't the case in a real world situation and shouldn't have posted but that's nothing new. A combination of both account types is clearly the best of both worlds and only sensible option.

The very best* is to get all the money into RS accounts paying more than the best standard deposit account as quickly as possible. When you have enough of them you can keep all of the money jingling around in RS accounts at 2%+. Hence people on this thread getting into the 20's to 30's of accounts.

*If we are limiting ourselves to short term (<=1 year) cash deposits

Cotta

Outside of the four accounts (I think) that pay 5%, do RS's make sense?

YorkshireBoy

Cotta wrote: »

Outside of the four accounts (I think) that pay 5%, do RS's make sense?

5 accounts.

Where else can you make 3% AER?

Cotta

HSBC, First Direct, Nationwide and M&S all have 5% rates, who is the fifth?