How to make the best out of interest 14 January at 11:05AM in Savings & investments 7 replies 847 views

misssandals

 2 questions.. 
First I have a Zopa savings with 91 days notice at 3.26% interest paid monthly and also a monthly saver with my bank which pays interest at 5.25% after a year.
So, which actually gives me more interest after 12 months? 
 And secondly I  know that on a monthly saver it is better to frontload the money but what is the best time to reduce the money put in?  I was thinking of reducing it by  25% every 3 months, but is that the best plan?

MX5huggy

You want as much money as you’re allowed in the 5.25% account as early as can. If your only source of funding for the better paying account is the other account it’s a bit more complicated. 

I don’t understand the second bit at all. 5.25% is always better than 3.26% even if it’s only for 1 month. 

Whitterbod

have a look here   https://www.moneysavingexpert.com/savings/regular-savings-calculator/

jimjames

misssandals said:

So, which actually gives me more interest after 12 months? 
 And secondly I  know that on a monthly saver it is better to frontload the money but what is the best time to reduce the money put in? 

The one paying the highest rate of interest will pay most interest. Monthly savers don't normally allow you to remove money until the end of term but even if they do there doesn't seem much point if they're paying the highest rate

AmityNeon

The key, defining element of Regular Savings Accounts is restrictions on monthly deposits. There may be access conditions, fixed/variable rates and maturity options, but such aspects can apply to other types of savings accounts as well.

If you deposit £400 into an account paying 5.25% gross, then each day, that £400 will earn the daily equivalent of 5.25% annual interest. If you’re seeking to maximise interest, it doesn’t make sense to deliberately reduce the amount you deposit, unless of course you found an account paying an even higher rate.

If you don’t use the Zopa stepmill, you can utilise 31-day Boosted pots. When a notice period ends, transfer £400 into the Club Lloyds Monthly Saver (I’m assuming), and reboost the Zopa pot.

Bridlington1

The Club Lloyds monthly saver is easy access so you're best off putting as much money as you can into it (so £400/mth), then if you run out of money in Zopa or need to access the money early you can just withdraw it without penalty.

Lloyds also do a monthly saver at 4.5% so it would probably be wise to start putting £250/mth into that as well if you haven't already, then if you run out of money in Zopa, you can start drip feeding money from the 4.5% monthly saver into the 5.25% one to really maximise your interest. 

phillw

misssandals said:

 And secondly I  know that on a monthly saver it is better to frontload the money but what is the best time to reduce the money put in?  I was thinking of reducing it by  25% every 3 months, but is that the best plan?

There is no hard and fast rule.

I would only reduce the payments, when you can open another regular saver that pays a higher amount & you can't afford to pay into both.

If you can beat the regular saver with an easy access account then you should just close the regular saver.

I have some 4.5% accounts that won't go to term, as I have higher rated regular savers that will require funding soon.

Bridlington1

phillw said:

misssandals said:

 And secondly I  know that on a monthly saver it is better to frontload the money but what is the best time to reduce the money put in?  I was thinking of reducing it by  25% every 3 months, but is that the best plan?

There is no hard and fast rule.

I would only reduce the payments, when you can open another regular saver that pays a higher amount & you can't afford to pay into both.

If you can beat the regular saver with an easy access account then you should just close the regular saver.

I have some 4.5% accounts that won't go to term, as I have higher rated regular savers that will require funding soon.

Or if the regular saver offers a variable rate of interest and allows penalty free withdrawals, then it's wise to reduce the regular saver to the minimum balance in case the rate rises again.

If I'd followed your logic I would have closed the Coventry BS First Home Saver (now no longer available) a couple of months ago since it paid 2.95% when Aldermore, Virgin Money (cash ISA) and HSBC all paid 3%. Instead I reduced the balance to £1 and now the FHS sits at 5% and I am currently pouring money back into it as it's one of the highest paying regular savers I've got.