How much interest will I make

YorkshireBoy

fimonkey,

This is hard to explain (for me as a non-mathematician) but...

I believe the 6.5 comes into play because you 'front load' the deposits, ie at the end of 11 months (or rather on the 1st day of the twelfth month) you've deposited all your money. Divided 11 by 2 and you get 5.5. Add the 'free month' at the end (with the full years subscription deposited) and 5.5 + 1 = 6.5 months.

If you're drip-feeding the regular saver from a high interest (say 6.25%) savings account, the corresponding interest figure on that account is £3,000 x 6.25% / 12 x 5.5 x 0.8 (because 6.5 + 5.5 = 12).

Clear as mud?

Miss_Sparkly_Star

Anyone?????????

One more question please.

Which will be better financially for me to open...

the britannia saver for a year if I open it this week or the nationwide fixed isa @6.15, don't understand how they work the interest out on this and whether the 6.15% will be honoured to nov 08 or will end at the beginning of the new financial year.

Basically i'm getting confised do i do an isa or a reg saver (btw the isa's going in my mums name as i've already paid into my isa for this year)..better hope she doesn't make any withdrawals:p

Aegis

Miss_Sparkly_Star wrote: »

Anyone?????????

One more question please.

Which will be better financially for me to open...

the britannia saver for a year if I open it this week or the nationwide fixed isa @6.15, don't understand how they work the interest out on this and whether the 6.15% will be honoured to nov 08 or will end at the beginning of the new financial year.

Usually it's better to get the tax-free status if it's available. As a rule this is the way forward.

Basically i'm getting confised do i do an isa or a reg saver (btw the isa's going in my mums name as i've already paid into my isa for this year)..better hope she doesn't make any withdrawals:p

I think that might technically count as tax evasion unless you are gifting the money to your mum for whatever she wants to do with it...

Miss_Sparkly_Star

Well..it just happens that she's decided to put it in the ISA after I gave it to her......:p

Aegis wrote: »

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Usually it's better to get the tax-free status if it's available. As a rule this is the way forward.



I think that might technically count as tax evasion unless you are gifting the money to your mum for whatever she wants to do with it...

ramagel

YorkshireBoy wrote: »

fimonkey,

This is hard to explain .......

Clear as mud?

It seems to get increasingly complex the more accurate you try to be, but look at it this way: what's the average of

12+11+10+9+8+78+6+5+4+3+2+1? Answer 6.5.

This assumes on the first deposit you get 12 months interest, the second deposit gets you 11 months interest (except that in reality now there's last months interest in the account too if it's paid month) and so on and so on.

Whatever: the depositor gets 6.5% pa - although the return on the entire amount is basically half that. The latter is true only if you had the £3k in your hand and only put £250 in each month (not earning interest in the feeder account as another poster said); the former is true if you have £250/month 'spare' out of each pay cheque. And then it depends when the tax is due and paid on the interest. Oh dear.

Sort of.

fimonkey

Thanks Yorkshire Boy, definately understood your answer.

Ramagel, you've kinda confused me again, but now I think I understand the 6.5 and 5.5 figures.

Cheers guys

CLAPTON

fimonkey wrote: »

Can I just ask, on the original calculations from Yorkshire Boy
£3,000 x 7.5% / 12 x 6.5 x 0.8 = £97.50

£3000= total amount saved (ie £250 x 12 mnths)
7.5% = interest rate
/12 = divide by 12 months
x6.5
x0.8 = the rate you get if you're a 20% tax payer.

Where did the 'multiply by 6.5' come from??

Apologies for my ignorance

the calculation goes as follows

250 is saved for 12 months
250 is saved for 11 months
250 is saved for 10 month
etc etc
until
250 is saved for 1 month

so total interest is

APR/12 x 250 x (12+11+10+9.....+1)
=APR/12 x 250 x (78)
= APR /12 x 250 x (12 x 6.5)
= APR x 3000 x 6.5 /12