club lloyds monthly saver interest earned at maturity

dreaMer001

If we go to lloyds bank website:

https://www.lloydsbank.com/savings/club-lloyds-monthly-saver.html

we can see:

"What might the future balance be?expandable section

For example, if you deposit £400.00 every month for 12 months you will have a balance of £4950.00 after interest is paid.

This assumes you deposit £400.00 in the middle of each month and you don’t withdraw any money or interest.

Interest is calculated each day. As your balance is lower at the start of the term and grows after each monthly deposit, your daily interest calculation also slowly increases. At the end of the term your interest is added into your savings account."

If I deposit £400 each month at the end of 12 months I would've deposited £400 x 12 = £4800. Going by lloyds bank calculation above, the total interest earned (profit) would therefore be = £4950 - £4800 = £150.

However, if I access: 

https://www.moneysavingexpert.com/savings/regular-savings-calculator/

and enter the values:

How much will you save each month? = £400.00

What's the interest rate? = 6.25%

How long will you save for? = 1 year

result says interest = £161

Is the MSE site interest calculator incorrect or is the lloyds bank website incorrect? Let me guess, they are both correct even though they both produce different results? In maths, I've heard of arriving at the same answer using different methods, but this is completely bizarre - is this different answer based on same method or different answer based on different methods. 

masonic

Did you not read the part that states: "This assumes you deposit £400.00 in the middle of each month and you don’t withdraw any money or interest"?

The MSE figure looks closer to the truth of what most people would do as it assumes you'll make the payment at the start of each month, but the actual interest you could earn depends on the day of the year you open the account, and the day you make each monthly deposit. If you open it towards the end of a month, then make the second and subsequent deposits on the 1st of each month, including a 13th payment, then you could earn more than the MSE figure.

So the different answers are both probably going to be incorrect as they are based on assumptions, which will likely differ from reality in any particular case.

dreaMer001

masonic said:

Did you not read the part that states: "This assumes you deposit £400.00 in the middle of each month and you don’t withdraw any money or interest"?

The MSE figure looks closer to the truth of what most people would do as it assumes you'll make the payment at the start of each month, but the actual interest you could earn depends on the day of the year you open the account, and the day you make each monthly deposit. If you open it towards the end of a month, then make the second and subsequent deposits on the 1st of each month, including a 13th payment, then you could earn more than the MSE figure.

So the different answers are both probably going to be incorrect as they are based on assumptions, which will likely differ from reality in any particular case.

I'll tell you what I didn't do - I certainly didn't read anything of the sort near the result on the MoneySavingExpert (MSE) site regular saver calculator! If I did I would've seen that the two sites were using different assumptions.

I tend to open regular/monthly saver accounts towards the end of the month and then deposit 1st of every month, with a 13th payment to conclude.

I have a spreadsheet that calculates the interest at maturity if the interest rate and monthly amount is entered in to two cells. See:



I believe the formula works with 'making the deposit at the start of the month' strategy. Not sure if it accounts for the first payment being made at the end of the month and/or 13 payments.

Since the MSE website calculator doesn't go in to detail about how it arrived at the result, we are left in the dark about the assumptions!

jimjames

dreaMer001 said:

Is the MSE site interest calculator incorrect or is the lloyds bank website incorrect? Let me guess, they are both correct even though they both produce different results? In maths, I've heard of arriving at the same answer using different methods, but this is completely bizarre - is this different answer based on same method or different answer based on different methods. 

They can both be correct despite giving different results. Your inputs might be the same but the underlying assumptions can be quite different and thus give different answers. Paying in first at the end of the month and then making payments at the start will have a different result to paying in mid month or end of the month every time.

It's like saying how long does it take to get from London to Newcastle? Lots of answers are valid depending on the inputs you give.

allegro120

masonic said:

Did you not read the part that states: "This assumes you deposit £400.00 in the middle of each month and you don’t withdraw any money or interest"?

The MSE figure looks closer to the truth of what most people would do as it assumes you'll make the payment at the start of each month, but the actual interest you could earn depends on the day of the year you open the account, and the day you make each monthly deposit. If you open it towards the end of a month, then make the second and subsequent deposits on the 1st of each month, including a 13th payment, then you could earn more than the MSE figure.

So the different answers are both probably going to be incorrect as they are based on assumptions, which will likely differ from reality in any particular case.

I've earned £166.64. 13 deposits, first on 5th March and subsequent on the 1st of each month. MSE calculator doesn't allow for 13th deposit and a leap year, otherwise is pretty accurate.

onomatopoeia99

dreaMer001 said:

masonic said:

Did you not read the part that states: "This assumes you deposit £400.00 in the middle of each month and you don’t withdraw any money or interest"?

The MSE figure looks closer to the truth of what most people would do as it assumes you'll make the payment at the start of each month, but the actual interest you could earn depends on the day of the year you open the account, and the day you make each monthly deposit. If you open it towards the end of a month, then make the second and subsequent deposits on the 1st of each month, including a 13th payment, then you could earn more than the MSE figure.

So the different answers are both probably going to be incorrect as they are based on assumptions, which will likely differ from reality in any particular case.

I'll tell you what I didn't do - I certainly didn't read anything of the sort near the result on the MoneySavingExpert (MSE) site regular saver calculator! If I did I would've seen that the two sites were using different assumptions.

I tend to open regular/monthly saver accounts towards the end of the month and then deposit 1st of every month, with a 13th payment to conclude.

I have a spreadsheet that calculates the interest at maturity if the interest rate and monthly amount is entered in to two cells. See:



I believe the formula works with 'making the deposit at the start of the month' strategy. Not sure if it accounts for the first payment being made at the end of the month and/or 13 payments.

Since the MSE website calculator doesn't go in to detail about how it arrived at the result, we are left in the dark about the assumptions!

Your formula doesn't account for compounding, you can't just divide an annual rate by 12 to get a monthly rate.  Doing so will overstate the interest earned. To get a genuine monthly rate you need to use logarithms and exponents, and even then since interest is calculated daily and months are variable length it remains an approximation.

dreaMer001

allegro120 said:

masonic said:

Did you not read the part that states: "This assumes you deposit £400.00 in the middle of each month and you don’t withdraw any money or interest"?

The MSE figure looks closer to the truth of what most people would do as it assumes you'll make the payment at the start of each month, but the actual interest you could earn depends on the day of the year you open the account, and the day you make each monthly deposit. If you open it towards the end of a month, then make the second and subsequent deposits on the 1st of each month, including a 13th payment, then you could earn more than the MSE figure.

So the different answers are both probably going to be incorrect as they are based on assumptions, which will likely differ from reality in any particular case.

I've earned £166.64. 13 deposits, first on 5th March and subsequent on the 1st of each month. MSE calculator doesn't allow for 13th deposit and a leap year, otherwise is pretty accurate.

Are you or anyone else aware how the MSE calculator comes up with the result? (how does MSE get from London to Newcastle?) Or is it a secret ?

Qyburn

To get maximum interest from the regular saver open it with first payment right at the end of the month, the put in the remaining 12 payments on the first of each following month.

This ignores what you might or might not earn from your first £400 where ever you keep it while waiting to open the Monthly Saver.

Also that the later in the month, the less time you'll have to open a new one in the month it matures. 

ColdIron

onomatopoeia99 said:

Your formula doesn't account for compounding

Regular savers that pay annually don't compound

jameseonline

I opened Club Lloyds 16th March 2023, funded 1st every month, 12 total payments earned £173.70 in interest

ColdIron

Why didn't you fund it on the 16th and make 12 monthly payments so 13 in all? Every little helps