Are Regular Savers worth it?

Steven.Still

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I am in a good position whereby I am able to max out each month three different regular saver accounts, a 2.75% with £250 max, 2.5% with £400 max and a 2% with £250 max respectively. I also have an easy access savings account at 1.36% variable.

My question is: I've worked out that I can earn more interest if I put all the £900 plus an extra £100 I can add to it, making £1000 a month total in to the easy access account instead of splitting it. But it's variable whereas the other accounts are fixed. Clearly one is locked away, the other gives me access if I need to get it.

I've looked at a notice account for a slightly higher rate but I'm not comfortable with waiting if I needed to get my cash.

What would you all do? I'd appreciate your thoughts!

eskbanker

Steven.Still wrote: »

I've worked out that I can earn more interest if I put all the £900 plus an extra £100 I can add to it, making £1000 a month total in to the easy access account instead of splitting it.

In which case you've made an error with your workings - the regular savers pay a weighted average of 2.43% so clearly this is better than 1.36%, for the £900.

It's obviously not a like-for-like comparison if you compare interest on £900 in one scenario with £1000 in another so you'd need to add the £100 to both sides of the equation....

LobsterMemory

eskbanker wrote: »

In which case you've made an error with your workings ..

Indeed.

And, as every one of the Regular Saver rates beats the easy access rate, one wonders why they needed any workings at all

colsten

Something is wrong with your calculations as you can't make more from accounts with lower interest rates. May I suggest you use the MSE Regular Saver calculator to model your various scenarios.

Also, have a look at the T&Cs of different RSs. Some, not all, do allow withdrawals without penalty.

Steven.Still

Thanks all. My calculations were made using the savings calculator on MSE, and that told me that after adding up the total of the regular savings accounts after 1 year, I'd be better off by putting the money in to the one easy access account. I tried the calculation with a couple of different variables and each said I'd be better off that way rather than splitting it.

Are we saying the MSE calculator is wrong?

bowlhead99

Steven.Still wrote: »

My question is: I've worked out that I can earn more interest if I put all the £900 plus an extra £100 I can add to it, making £1000 a month total in to the easy access account instead of splitting it.

Clearly that is wrong - it can't be the case that you make more interest if you have £1000 going into an account paying 1.36%, than if you had £900 going into accounts earning 2%+ and the other £100 earning 1.36%. Obviously, the accounts with the higher rates (2% or more) are the best place for your money to earn interest, if interest is your goal, because they pay higher rates. No need to even do any calculations.

But it's variable whereas the other accounts are fixed. Clearly one is locked away, the other gives me access if I need to get it.

If the accounts which pay better rates will not allow you to withdraw or close the account down to get access to cash in an emergency, even by paying a penalty charge, and would make you wait until the end of the 12 month term to be able tohen they are not a good place for you to put your 'emergency fund' . So, it would be a compromise between 'locking the money away' for the remaining term (which would be reducing as the months go on) and having better access.

However, you mention accounts at 2.5% on £400pm and 2% on £250pm. Are those the accounts from Lloyds? I use those and the money is not 'locked away' at all. They are completely instant access and pay the full rate of daily interest for every day your money is actually in the account. So if you had some expenditure needing £2000 in 6 months from now, and had £2400 in the regular saver account at that time, you could simply take it out. You would still have earned more interest getting 2.5% for the 6 months than putting it in your low interest 1.36% easy access account for the 6 months.

Steven.Still wrote: »

Thanks all. My calculations were made using the savings calculator on MSE, and that told me that after adding up the total of the regular savings accounts after 1 year, I'd be better off by putting the money in to the one easy access account. I tried the calculation with a couple of different variables and each said I'd be better off that way rather than splitting it.

Are we saying the MSE calculator is wrong?

You are saying the calculator shows a worse result for putting £900 a month into accounts at 2%+ than for putting £1000 a month at 1.36%. ?

No it doesn't.

Steven.Still

Okay, this may add clarity as I wasn't clear earlier:

The total I can have in all 3 RSs over the time they have left is £10686.65. Calculation taken from MSE calculator.

If I took the £2200 that I have in all three now, closing them and put it in to the easy access saver, adding in an extra £1000 a month to that account, the MSE calculator says that over the same period until the RSs would have ended, I'd have £13302.66

So the calculations say I'd be better off doing that!

pip895

Going back to the original question - Are regular savers worth it - I have come to the conclusion that for me the answer is no. I admit that in part this is because I'm not organised enough - On more than one occasion I have left monies in the accounts too long and suffered their diabolical default interest rates for months and on another occasion I accidentally transferred funds from the wrong account - I realised immediately but there was no way of undoing it so a great deal of the benefit of the account was lost.

My solution has been to consider what proportion of my funds I can lock away and for how long. I then have a proportion in easy access and the rest in notice accounts. There headline rate is slightly lower than some of the regular savers but by the time you factor in that you can put the lot in on day 1 I am actually better off, even without factoring in messing up on the regular savers.

I am using HLs active savings so my instant access is only at 1.2% but I got Shawbrook one year fix at 2.02% back in August. I think the best 1 year fix they have at the moment is 1.8% or 2.1% for a three year fix. The most important thing for me is how easy it is to manage things - It is early days but I think the "downtime" i.e. time my money spends getting no or very little interest will be heavily reduced.

grumiofoundation

Steven.Still wrote: »

So the calculations say I'd be better off doing that!

You need to realise your calculations are wrong.

How can having money in an account paying higher interest not give you more interest?

Most common error made with regular saver calculations is assuming the money not in regular savers will be in a 0% account.

Reaper

Steven.Still wrote: »

Okay, this may add clarity as I wasn't clear earlier:

I think we will need the full details. How much currently in each and how long left to run because something still doesn't add up.

It doesn't explain it all but one detail you seem to have missed is you are not comparing like with like. You appear to be comparing putting £900pm in regular savers with putting £1000pm in a standard savings account.

LobsterMemory

Looks like

1/ You're not including the #2200 in the 1st calculation
2/ You're not including the #100 per month in the first calculation - treat it as another regular saver at 1.36%
3/ You may be counting the #2200 twice in the 2nd calculation - you aren't using it to fund your regular savings

So forget about the #2200
Work out interest on the #100 per month and add it to the previous figure

Compare it with a regular saver at #1000 per month at 1.36%