Regular Saver - Equivalent interest rate by month drops?

polymaff

w.h.i.p.p.e.t wrote: »

Interestingly, I then ran through my original suggestion using the same method and over 12 months actually calculated more overall interest from both accounts by dropping the 3% pot halfway whilst filling the regular for the first 6 months then re-filling the 3% pot for the second 6 months and leaving the regular the same.

That pouring in more capital half-way through the year increases the total earnings over the whole year is hardly unexpected.


Make the most of Regular Savers, by the way. Like ISAs, SAYE accounts were the government's of the day "good idea". In both cases they initially paid illogically high interest rates - but ISAs have now well and truly lost that crazy bonus - as will, as are, Regular Savers.

pochisoldi

A 5% per annum regular savings account pays 5% on money that's in the account for one "annum" (=year).

If you want to work out how much you will earn, almost to the penny, you need to make a spreadsheet with twelve rows, one for each monthly payment
In each row you have the following columns
A: The money paid in that month (e.g. £250)
B: The date the money was paid in (e.g. 01/12/18)
C: The date the account matures (e.g. 25/06/19)
The annual interest rate (e.g. 5%) This must be a percentage (i.e. 0.05 or 5% not 5)
E: C-B (= number of days that amount in column A is saved for)
F: =(1+D)^(E/365)-1 (=The interest rate for E days)
G: =A*F (=the interest receivable on that month's payment)

Add up all the amounts in column G, round to 2 decimal places, and that's the approximate figure expect to receive when the account matures.

Note that is difficult to quickly explain how to create a spreadsheet - there's sufficient information here to allow some familiar with Excel or its equivalent to do the job, noting that the simple column letters shown in each of the formulae above will need expanding to the actual cell references for each row.

PochiSoldi

w.h.i.p.p.e.t

colsten wrote: »

I reckon your calculations have a serious flaw. Interest is calculated daily, based on the balance at the end of the day, and on the AER % / 365.

Whilst it is possible to create your own spreadsheet to do the calculations, it's much easier to simply use the MSE RS calculator, which you can find via the link I posted earlier.

Yes. I looked at the calculator for a full drip feed. I can see that, as was mentioned, you end up with the average of the two interest rates. I used the calculator to check my spreadsheet was working.

I created a spreadsheet, because I only want to part fill via drip feeding. My question was after I finish drip feeding and I can begin using income again (existing Reg Saver matures in 6 months), where should the money go. This was based on my flawed understanding of how the interest works. I see that now.

There was an error on the spreadsheet. Which led me down the garden path. I ran the same thing with a new spreadsheet from home this morning and can see that I’ll make an extra £20 by continuing to fill the regular saver. Not quite sure what I did wrong yesterday.

Thanks.

w.h.i.p.p.e.t

pochisoldi wrote: »

A 5% per annum regular savings account pays 5% on money that's in the account for one "annum" (=year).

If you want to work out how much you will earn, almost to the penny, you need to make a spreadsheet with twelve rows, one for each monthly payment
In each row you have the following columns
A: The money paid in that month (e.g. £250)
B: The date the money was paid in (e.g. 01/12/18)
C: The date the account matures (e.g. 25/06/19)
The annual interest rate (e.g. 5%) This must be a percentage (i.e. 0.05 or 5% not 5)
E: C-B (= number of days that amount in column A is saved for)
F: =(1+D)^(E/365)-1 (=The interest rate for E days)
G: =A*F (=the interest receivable on that month's payment)

Add up all the amounts in column G, round to 2 decimal places, and that's the approximate figure expect to receive when the account matures.

Note that is difficult to quickly explain how to create a spreadsheet - there's sufficient information here to allow some familiar with Excel or its equivalent to do the job, noting that the simple column letters shown in each of the formulae above will need expanding to the actual cell references for each row.

PochiSoldi

Thanks. I had an error on my spreadsheet yesterday. Serves me right, should have been working

Created a fresh one this morning and it works out fine. I worked with the balances and then double checked with a different sheet using the deposits.

Aretnap

AER is designed to make things simple. Your money is always better off earning 5% AER than 3% AER. That's all you need to know. If you can't transfer as much as you might like for as long as you might like from the 3% account to the 5% account, you are still better off transferring as much as you can for as long as you can. The only exception is of there are penalties for early withdrawal, or if early withdrawal is not allowed, in which case those are things that you would have to take into account.

w.h.i.p.p.e.t

polymaff wrote: »

Make the most of Regular Savers, by the way. Like ISAs, SAYE accounts were the government's of the day "good idea". In both cases they initially paid illogically high interest rates - but ISAs have now well and truly lost that crazy bonus - as will, as are, Regular Savers.

That’s how I’d viewed the shape of things to come. I’ve always used Nationwide for the regular saver and it was better initially at 500/m plus the fact that you could a have more than one each via joint accounts etc. They have gradually been phasing these out by dropping to 250 and then only allowing one and now it’s been cut altogether. Hence my looking around.

What’s the general consensus on this one. Is this just one bank tightening it’s belt? Is it worth opening more concurrent accounts with various banks before they follow suit? I’d originally planned to open multiple accounts in a more phased approach to make them easier to fill/manage. Opening a new one every few months. I’m now wondering if it’s better to just get them all together, before they’re gone...

w.h.i.p.p.e.t

Aretnap wrote: »

AER is designed to make things simple. Your money is always better off earning 5% AER than 3% AER. That's all you need to know. If you can't transfer as much as you might like for as long as you might like from the 3% account to the 5% account, you are still better off transferring as much as you can for as long as you can. The only exception is of there are penalties for early withdrawal, or if early withdrawal is not allowed, in which case those are things that you would have to take into account.

Thank you.

colsten

w.h.i.p.p.e.t wrote: »

I’m now wondering if it’s better to just get them all together, before they’re gone...

If you have the money to make use of the Regular Savers, and if some or all of that money earns lower AER than you can get in Regular Savers, it's a no-brainer to open as many as you need. Obviously you need to check the T&Cs, for things such as any minimum and maximum monthly deposits, penalties for withdrawals etc.. I can't see much point in opening RSs and then not using them

polymaff

w.h.i.p.p.e.t wrote: »

What’s the general consensus on this one. Is this just one bank tightening it’s belt?.

I reckon that it is a return to a logical basis. Government schemes, marketing schemes are all a bit bonkers, Nationwide - as you say £500 > £250 > no more 5% - admits that 80+% of their regular saver accounts are being used as steady earners by existing members rather than pulling in new, profitable, business.

I wonder how long bank account switching bonuses will last? Just how much of those bonus and admin costs are ever recovered?

Marketing departments are a bit of a curate's egg and can bring down the business involved. Hoover and the free flights, wasn't it?

pochisoldi

polymaff wrote: »

I reckon that it is a return to a logical basis. Government schemes, marketing schemes are all a bit bonkers, Nationwide - as you say £500 > £250 > no more 5% - admits that 80+% of their regular saver accounts are being used as steady earners by existing members rather than pulling in new, profitable, business.

I wonder how long bank account switching bonuses will last? Just how much of those bonus and admin costs are ever recovered?

Marketing departments are a bit of a curate's egg and can bring down the business involved. Hoover and the free flights, wasn't it?

I wonder what proportion of the Nationwide's customer base are "eggs in one basket" cases, as in people who buy all their financial products from one place, and never look any further.(in popular parlance - mugs).

There's nothing wrong with that approach - my Mum does that with savings, because she wants the simple life and CBA handling umpteen organisations. She'll chose the best savings product from a 2 or 3 organisations, but on the other hand, insurance always gets selected as a standalone product, looking for the best deal.

PochiSoldi