[Easy Access]£150 per month into 6.17% or 300-400 per month into 5.2%

UndergroundSaxClub

Hi all,

Bit of a noob when it comes to savings accounts, and I am rubbish at maths. Hoping for some input from this incredible forum.

As a background, I used to save all my money into premium bonds and sat on a lump sum like a dragon, I have recently purchased my first home and beyond my 6 month emergency fund I need to start saving again.

As it stands I am able to save up to around £400 a month quite comfortably. However, I would like this to be easily accessible should the worst happen and my emergency fund not cover it. The main purpose of my savings now will be to overpay my mortgage on an annual basis.

As I no longer have a huge lump sum, Premium Bonds seem like the worst choice. I have found the RBS Digital Saver which is Easy Access and offers 6.17%. However, this has a maximum deposit of £150 per month, and any extra would probably sit in my current account earning nothing. The next highest Easy Access according to the newsletter is Santander at 5.2%, I'm not quite sure how £150 at 6.17% and £300~ at 5.2% would compare after a year.

I've also come across the NS&I 1 year fixes at 6.2% which seem to be the best overall today. However, they are fixed and possibly not ideal for huge emergencies or overpaying the mortgage annually.

Hoping for some input on anything I may have missed? According to the MSE Calculator (assuming I have done it correctly) RBS would generate £61 in interest annually with £150 per month, whereas Santander would generate £103 with £300 per month.

KTF

The amount you get on a regular saver is roughly half the published rate over the duration.

You would be better putting whatever you can in to the Santander account at 5.2% to maximise the interest.

ColdIron

KTF said:

The amount you get on a regular saver is roughly half the published rate over the duration.

No it isn't. You will get the full rate on all of the money deposited. You would be better to think of it as the actual rate on the average balance, £900

You would be better putting whatever you can in to the Santander account at 5.2% to maximise the interest.

You would make more interest by using the RBS RS and the Santander account. That would maximise the interest

It would be even better if the OP used another RS such as First Direct for £300 at 7% and the balance in the RBS one

This is Money Saving Expert

wiseonesomeofthetime

I agree with @coldiron , in as much as use both RBS and Santander.

Whilst First Direct RS is 7%, should you need access that rate drops dramatically. Time for your Crystal Ball. I'd lend you mine, but it don't work 🤦‍♂️😂

friolento

I would go with the Club Lloyds Monthly Saver. £400/mth, 6.25%, easy access if required.

You need a Club Lloyds current account, which comes with a monthly charge which can easily be avoided, and with optional freebies, such as a Disney Channel sub.

If you'd rather stick with RBS/Santander, then £150 into RBS and £250 into Santander is your best option, as @ColdIron said.

UndergroundSaxClub

Thanks all. If I were to go down the route of RBS and Santander the overall saving would be split between them. With RBS at 150 and Santander at around 150-250 per month. RBS would be the sure thing as I think the interest is paid annually so the money would stay there. Whereas Santander would be monthly interest should I need to pull the amount out for any reason I have gotten some interest in the meantime. Off the top of my head I think the annual interest would be £20-30 higher than just Santander alone, or am I way off?

friolento

wiseonesomeofthetime said:

I agree with @coldiron , in as much as use both RBS and Santander.

Whilst First Direct RS is 7%, should you need access that rate drops dramatically. Time for your Crystal Ball. I'd lend you mine, but it don't work 🤦‍♂️😂

Minor? snag with the FD RS is that you lose nearly all your interest if you need early access to your money. The OP is looking for easy access, I think

ColdIron

friolento said:

wiseonesomeofthetime said:

I agree with @coldiron , in as much as use both RBS and Santander.

Whilst First Direct RS is 7%, should you need access that rate drops dramatically. Time for your Crystal Ball. I'd lend you mine, but it don't work 🤦‍♂️😂

Minor? snag with the FD RS is that you lose nearly all your interest if you need early access to your money. The OP is looking for easy access, I think

The FD RS is easy access should you need it but yes, the rate decreases to that of the Savings Account, 2.00%

PloughmansLunch

UndergroundSaxClub said:

Thanks all. If I were to go down the route of RBS and Santander the overall saving would be split between them. With RBS at 150 and Santander at around 150-250 per month. RBS would be the sure thing as I think the interest is paid annually so the money would stay there. Whereas Santander would be monthly interest should I need to pull the amount out for any reason I have gotten some interest in the meantime. Off the top of my head I think the annual interest would be £20-30 higher than just Santander alone, or am I way off?

RBS & NatWest digital savers pay monthly interest on the balance in perpetuity

fabsaver

It's possible to have the Digital Saver accounts with both RBS and NatWest. That's £300 a month and you may be able to put more in by turning on debit card round ups.

Whatever else you have to save could go to the Santander Easy Access.

Don't get too hung up on whether the interest is paid monthly or annually. You will still ultimately receive the interest for however many days the money is actually in the account.

Exodi

KTF said:

The amount you get on a regular saver is roughly half the published rate over the duration.

You would be better putting whatever you can in to the Santander account at 5.2% to maximise the interest.

With respect, if you're responding to a technical question like the OP poses, could you at least express your answer as an opinion if you're not confident on the topic?

Your answer is incorrect and putting money in an account paying 5.2% interest instead of 6.17% is the opposite of maximising interest.

UndergroundSaxClub said:

Thanks all. If I were to go down the route of RBS and Santander the overall saving would be split between them. With RBS at 150 and Santander at around 150-250 per month. RBS would be the sure thing as I think the interest is paid annually so the money would stay there. Whereas Santander would be monthly interest should I need to pull the amount out for any reason I have gotten some interest in the meantime. Off the top of my head I think the annual interest would be £20-30 higher than just Santander alone, or am I way off?

This is another common misunderstanding. The interest is paid monthly or annually, but is usually calculated daily.

To make it easier to understand, if you had £100 in an account paying 5% interest annual for a year, you'd earn £5 in interest over a year. That's not to say the bank looks at your balance at the end of the year and adds 5% to it, in reality behind the scenes they were adding a tiny amount of interest to your account every day and they just pay it to you at the end.

If, for example you had £100 in the same account but took it out after 6 months and then left it empty the last 6 months, behind the scenes you you still have built up the interest from the first 6 months, but will earn nothing on the latter 6 months... so once the year is up, they'd pay you £2.50 at the end.

There are some exceptions to this - for example, some accounts (e.g. First Direct) actively penalise you for withdrawing any money by reducing the interest rate. Others (e.g. Lloyds) don't, so it's worth reading the FAQ's about withdrawals.

People over-complicate these sorts of things, generally bigger number = better (assuming there are no oppressive terms). Unfortunately it's relatively common that people confuse regular savers because they don't understand why they don't earn a years worth of interest on the ending balance.