First Direct's 7% Savings Account

cricidmuslibale

schiff said:

User36750 said:

Thanks all.

Not sure it's really worth it for £135ish.

But thank you for showing workings out too!

Imagine in addition having others at 5% 5.5% 4.5% 4% etc etc

Agreed, but imo multiple regular savers really come into their own for those who don’t earn enough to pay income tax on their savings as the full 5%, 5.5%, 4.5% etc interest payments can always be retained rather than effectively earning net 4% or 3%, 4.4% or 3.3%, 3.6% or 2.7% etc instead once the appropriate Personal Savings Allowance has been used up.

That is not to say in any way at all that regular savers are unsuited to basic rate or higher rate taxpayers, far from it, as the above net interest rates are still higher than the interest rates on most tax free savings accounts, especially for basic rate taxpayers. Rather it is to emphasise that savers who don’t pay income tax on their savings really really should, without any hesitation whatsoever, save into as many high interest rate regular savers as they can reasonably manage to cope with each year, if they want to maximise their total annual amount of savings interest!

surreysaver

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

So, does my rough calculation think that there is £0 for the first month? Is that where I have gone wrong?

RG2015

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

surreysaver said:

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

So, does my rough calculation think that there is £0 for the first month? Is that where I have gone wrong?

Yes, that is correct, and I have just twigged that is where the 6.5 comes from.

1,950 /3,600 x 12 = 6.5.

grumbler

surreysaver said:

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

So, does my rough calculation think that there is £0 for the first month? Is that where I have gone wrong?

Your calculation implies that you add money in the middle of each month, not at the start. So, the average balance is

150 - for the first month

3450 -  for the last month

1800 - for the year.

ColdIron

RG2015 said:

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

surreysaver said:

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

So, does my rough calculation think that there is £0 for the first month? Is that where I have gone wrong?

Yes, that is correct, and I have just twigged that is where the 6.5 comes from.

1,950 /3,600 x 12 = 6.5.

Another way to look at it is the average number of £300 chunks you have:

(1 + 2 + 3  ..... 10 + 11 + 12) / 12 = 6.5

Reg_Smeeton

It’s all about academic isn’t it though chaps… OP is obviously too wealthy to bother with picking up an easy £130 (ish) or indeed to do their own calculations 

surreysaver

grumbler said:

surreysaver said:

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

So, does my rough calculation think that there is £0 for the first month? Is that where I have gone wrong?

Your calculation implies that you add money in the middle of each month, not at the start. So, the average balance is

150 - for the first month

3450 -  for the last month

1800 - for the year.

Got it. That makes sense. I like to know what I'm doing wrong so I can alter my arithmetical in the future!

masonic

surreysaver said:

grumbler said:

surreysaver said:

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

So, does my rough calculation think that there is £0 for the first month? Is that where I have gone wrong?

Your calculation implies that you add money in the middle of each month, not at the start. So, the average balance is

150 - for the first month

3450 -  for the last month

1800 - for the year.

Got it. That makes sense. I like to know what I'm doing wrong so I can alter my arithmetical in the future!

Using the general case that the average balance over the year is (F+L)/2 where F and L are monthly averages for first and last account month, you can apply adjustments to account for differences in the rules for a specific regular saver, for example where you can make a second payment almost immediately (open late in the calendar month, then switch to payments on the 1st of each month), F could be closer to £600 in the £300 per month case; and where a 13th payment is allowed L may be closer to £3,900. As such you can get a bit closer to the actual figure without making the sums too complex. Not relevant to First Direct of course, since there is no flexibility in payment date in that case, but useful for other regular savers.

When feeding from another savings account, the same formula can be used for the interest earned on the money remaining in the feeder account, this time using F = £3,300 and L = £0 in the case of First Direct.

surreysaver

masonic said:

surreysaver said:

grumbler said:

surreysaver said:

agent69 said:

The amount invested increases from £300 in month one up to £3600 in month 12.

Average amount invested is £300 + £3600 divided by 2 (£1950). So interest will be £1950 * 7% = £136.50.

So, does my rough calculation think that there is £0 for the first month? Is that where I have gone wrong?

Your calculation implies that you add money in the middle of each month, not at the start. So, the average balance is

150 - for the first month

3450 -  for the last month

1800 - for the year.

Got it. That makes sense. I like to know what I'm doing wrong so I can alter my arithmetical in the future!

Using the general case that the average balance over the year is (F+L)/2 where F and L are monthly averages for first and last account month, you can apply adjustments to account for differences in the rules for a specific regular saver, for example where you can make a second payment almost immediately (open late in the calendar month, then switch to payments on the 1st of each month), F could be closer to £600 in the £300 per month case; and where a 13th payment is allowed L may be closer to £3,900. As such you can get a bit closer to the actual figure without making the sums too complex. Not relevant to First Direct of course, since there is no flexibility in payment date in that case, but useful for other regular savers.

When feeding from another savings account, the same formula can be used for the interest earned on the money remaining in the feeder account, this time using F = £3,300 and L = £0 in the case of First Direct.

Brilliant. Makes much more sense

subjecttocontract

It doesn't matter very much wether an estimate is a few quid out.......one thing is for sure.......nobody else is paying 7%......yet.