SUB 3% Regular savings accounts

PRAISETHESUN

If you are treating a RS as a fixed term savings account looking to invest a lump sum right now then yes, it will work out at roughly half the advertised rate over the long term, more if it is earning some interest in a holding account whilst you drip feed it in. Otherwise it helps to consider it as it has been discussed above - at any moment the money in the account is earning 3% which is better than the 1.5% from Marcus, etc.

Bobblehat

Yes … I see. I just did a mock up in a spreadsheet and see that a 2% RS drip fed from Marcus earns more in total than just leaving it in Marcus.

Why hadn't I spotted that before! I had previously ignored sub 3% RS's. Time to rethink! Thanks folks!

sully1311

Bobblehat wrote: »

Yes … I see. I just did a mock up in a spreadsheet and see that a 2% RS drip fed from Marcus earns more in total than just leaving it in Marcus.

Why hadn't I spotted that before! I had previously ignored sub 3% RS's. Time to rethink! Thanks folks!

There's a handy drip feed calculator on the Regular Savings MSE page.

Bobblehat

The penny(sic) has now dropped as to why the likes of Virgin RS's are popular with MSE savers!

etienneg

Surely there's no need for a spreadsheet just to see IF drip feeding a 3%pa regular saver from a 1.5%pa savings account is better than just having the fixed amount in the savings account.

In the latter case you will get 1.5% over the year, but with the regular saver some of the money will earn 3%pa rather than 1.5%pa, and all the money will always be earning one or other of these rates. Some at 3%pa and the rest at 1.5%pa MUST be better than all at 1.5%pa.

Bobblehat

etienneg wrote: »

Surely there's no need for a spreadsheet just to see IF drip feeding a 3%pa regular saver from a 1.5%pa savings account is better than just having the fixed amount in the savings account.

In the latter case you will get 1.5% over the year, but with the regular saver some of the money will earn 3%pa rather than 1.5%pa, and all the money will always be earning one or other of these rates. Some at 3%pa and the rest at 1.5%pa MUST be better than all at 1.5%pa.

You have to understand my confusion was down to a 2% RS seemingly yielding an equivalent of 1.08% over a year (and therefore less than 1.5% in Marcus) and a 3% RS seemingly yielding 1.63% (and therefore more than 1.5%). That is why I had ignored RS's less than 3% in the past.

I have seen the error of my ways now and hope to persuade you that I am no longer dim-witted and now only half-witted

Reed_Richards

The regular saver account I pay into has a fixed one year term. Ideally you would have 12 of these, spaced one month apart, so each month one account matures and you use the proceeds to make the regular contribution to the 11 others. I don't know if anyone has ever managed to actually do this.

Duckyduck

Reed_Richards wrote: »

The regular saver account I pay into has a fixed one year term. Ideally you would have 12 of these, spaced one month apart, so each month one account matures and you use the proceeds to make the regular contribution to the 11 others. I don't know if anyone has ever managed to actually do this.

Everyone’s circumstances and cash needs are different, but what you propose sounds like an awful lot of cash.

Personally I use regular savers as an emergency buffer and to cover expected costs in 1-2 years time, then invest the rest where over the longer term returns should be much higher than 12 regular savers.

Reed_Richards

Duckyduck wrote: »

Everyone’s circumstances and cash needs are different, but what you propose sounds like an awful lot of cash.
.

It would be an awful lot of cash if you invested the maximum permitted amount into each of the 12 regular saver accounts but there would be no need to do this.

Herbalus

Reed_Richards wrote: »

It would be an awful lot of cash if you invested the maximum permitted amount into each of the 12 regular saver accounts but there would be no need to do this.

But if you didn’t invest the maximum into each account, it wouldn’t make any sense to have 12 of them? Why not just have fewer?