13th Regular Savings Payment Trick

allegro120

Catplan said:

allegro120 said:

friolento said:

CrickJon said:

What is the 'trick'?

Open the account and make your first month's deposit as close as possible to the end of a month. Then make another 12 deposits, starting on the 1st of the next month.

I open then them as soon as they go live and fund them straight away, can't see much advantage in delaying the first deposit to the end of the month.  

So say for example you open a RS on the 28th of the month and pay the maximum allowed, let’s just say it £250 a month then on 1st of the month you pay another £250 in, you’ve started off after a few days with £500 earning interest for more or less the 12 months, so gain a bit extra….. by having double the first payment in for as long as possible.

i tend to open and fund when I’m aware of a new product, but some like to try and maximise it,

If the account becomes available on the 28th I will naturally open and fund it on the same day and make subsequent payment on the 1st of next month, but for example if I open the account on the 15th I can't see how I will benefit from delaying my first deposit until the end of the month. 

flaneurs_lobster

allegro120 said:

Catplan said:

allegro120 said:

friolento said:

CrickJon said:

What is the 'trick'?

Open the account and make your first month's deposit as close as possible to the end of a month. Then make another 12 deposits, starting on the 1st of the next month.

I open then them as soon as they go live and fund them straight away, can't see much advantage in delaying the first deposit to the end of the month.  

So say for example you open a RS on the 28th of the month and pay the maximum allowed, let’s just say it £250 a month then on 1st of the month you pay another £250 in, you’ve started off after a few days with £500 earning interest for more or less the 12 months, so gain a bit extra….. by having double the first payment in for as long as possible.

i tend to open and fund when I’m aware of a new product, but some like to try and maximise it,

If the account becomes available on the 28th I will naturally open and fund it on the same day and make subsequent payment on the 1st of next month, but for example if I open the account on the 15th I can't see how I will benefit from delaying my first deposit until the end of the month. 

By delaying until the end of the month you are maximising the amount of funds that are held at the RS rate. In effect you give up 15 days of RS interest on the first month's deposit to have 2 month's-worth earning the RS rate for a year.

The amounts are pretty small (but satisfying).

masonic

Effectively you are extending the length of the 13th calendar month, which is the month where the most interest is earned, by shortening the first calendar month, when very little interest is earned. So you get X extra days interest on 12x the monthly deposit. Delaying from 15th to 28th would equate to an extra £6.40ish on a 6% RS allowing £250pcm, minus what you could get on those last 13 days in an easy access account. You'd probably be a couple of quid up in the end.

35har1old

Catplan said:

allegro120 said:

friolento said:

CrickJon said:

What is the 'trick'?

Open the account and make your first month's deposit as close as possible to the end of a month. Then make another 12 deposits, starting on the 1st of the next month.

I open then them as soon as they go live and fund them straight away, can't see much advantage in delaying the first deposit to the end of the month.  

So say for example you open a RS on the 28th of the month and pay the maximum allowed, let’s just say it £250 a month then on 1st of the month you pay another £250 in, you’ve started off after a few days with £500 earning interest for more or less the 12 months, so gain a bit extra….. by having double the first payment in for as long as possible.

i tend to open and fund when I’m aware of a new product, but some like to try and maximise it,

Won't work with the Coventry payment will be returned payment has to be made a month later

allegro120

masonic said:

Effectively you are extending the length of the 13th calendar month, which is the month where the most interest is earned, by shortening the first calendar month, when very little interest is earned. So you get X extra days interest on 12x the monthly deposit. Delaying from 15th to 28th would equate to an extra £6.40ish on a 6% RS allowing £250pcm, minus what you could get on those last 13 days in an easy access account. You'd probably be a couple of quid up in the end.

I though the first deposit earns most interest because of it's length... Thank you @flaneurs_lobster and @masonic for trying to explain it, but I still can't grasp it.  Really want to understand it.

We don't know how the rates and availability of accounts might change, so let's try a hypothetical scenario.  RS and feeder EA rates never change and the same RS is available in 12 month time. £250 deposits are credited on the same day. EA is 5% and RS is 6%.
Version 1.  I open and fund RS on 15th Jan, make 13 £250 payments, collect capital and interest on 15th Jan next year and start the new one. 
Version 2.  I open RS on 15th Jan, delay my first deposit until 30th Jan, make 13 £250 payments, collect capital and interest on 15th Jan next year and start the new one.

Do I not loose on the difference between 5% and 6% for the first 15 days?

Johnny-Cage

Does the Club Lloyds RS allow a 13th payment of £400
I opened the account 5th June last year so my 12th payment will be 1st May
So therefore if allowed I could credit £400 1st June before it finishes on the 5th 

ForumUser7

Johnny-Cage said:

Does the Club Lloyds RS allow a 13th payment of £400
I opened the account 5th June last year so my 12th payment will be 1st May
So therefore if allowed I could credit £400 1st June before it finishes on the 5th 

AFAIK Yes

[Body is 1 character too short. ~ not anymore]

masonic

allegro120 said:

masonic said:

Effectively you are extending the length of the 13th calendar month, which is the month where the most interest is earned, by shortening the first calendar month, when very little interest is earned. So you get X extra days interest on 12x the monthly deposit. Delaying from 15th to 28th would equate to an extra £6.40ish on a 6% RS allowing £250pcm, minus what you could get on those last 13 days in an easy access account. You'd probably be a couple of quid up in the end.

I though the first deposit earns most interest because of it's length... Thank you @flaneurs_lobster and @masonic for trying to explain it, but I still can't grasp it.  Really want to understand it.

We don't know how the rates and availability of accounts might change, so let's try a hypothetical scenario.  RS and feeder EA rates never change and the same RS is available in 12 month time. £250 deposits are credited on the same day. EA is 5% and RS is 6%.
Version 1.  I open and fund RS on 15th Jan, make 13 £250 payments, collect capital and interest on 15th Jan next year and start the new one. 
Version 2.  I open RS on 15th Jan, delay my first deposit until 30th Jan, make 13 £250 payments, collect capital and interest on 15th Jan next year and start the new one.

Do I not loose on the difference between 5% and 6% for the first 15 days?

The opening deposit always earns the same amount of interest on an annual regular saver. Unless you deliberately forfeit interest by not paying in the maximum amount on day 1 of the account year. In the first calendar month, you earn the least interest and in the last calendar month you earn the most interest. Think about the sequence of interest payments you'd receive if interest were paid monthly on 1st of each month and at maturity. The middle 11 calendar months would be the same regardless of opening day, only the first and last would be different.

Version 2 above doesn't make sense. It should read "I open the RS on 30th Jan" to match what is being discussed. You then do lose the difference between 5% and 6% on £250 for 15 days (10p), but gain the difference between 6% and 5% on £2,500 for 15 days on the other side (£1.03). That's comparing renewing the RS with £250 after having £2,750 in there for just 15 days vs 30, which compares like for like over the full 380 days under consideration.

allegro120

Johnny-Cage said:

Does the Club Lloyds RS allow a 13th payment of £400
I opened the account 5th June last year so my 12th payment will be 1st May
So therefore if allowed I could credit £400 1st June before it finishes on the 5th 

Yes, I always do 13 payments to Club Lloyds.

allegro120

masonic said:

allegro120 said:

masonic said:

Effectively you are extending the length of the 13th calendar month, which is the month where the most interest is earned, by shortening the first calendar month, when very little interest is earned. So you get X extra days interest on 12x the monthly deposit. Delaying from 15th to 28th would equate to an extra £6.40ish on a 6% RS allowing £250pcm, minus what you could get on those last 13 days in an easy access account. You'd probably be a couple of quid up in the end.

I though the first deposit earns most interest because of it's length... Thank you @flaneurs_lobster and @masonic for trying to explain it, but I still can't grasp it.  Really want to understand it.

We don't know how the rates and availability of accounts might change, so let's try a hypothetical scenario.  RS and feeder EA rates never change and the same RS is available in 12 month time. £250 deposits are credited on the same day. EA is 5% and RS is 6%.
Version 1.  I open and fund RS on 15th Jan, make 13 £250 payments, collect capital and interest on 15th Jan next year and start the new one. 
Version 2.  I open RS on 15th Jan, delay my first deposit until 30th Jan, make 13 £250 payments, collect capital and interest on 15th Jan next year and start the new one.

Do I not loose on the difference between 5% and 6% for the first 15 days?

The opening deposit always earns the same amount of interest on an annual regular saver. Unless you deliberately forfeit interest by not paying in the maximum amount on day 1 of the account year. In the first calendar month, you earn the least interest and in the last calendar month you earn the most interest. Think about the sequence of interest payments you'd receive if interest were paid monthly on 1st of each month and at maturity. The middle 11 calendar months would be the same regardless of opening day, only the first and last would be different.

Version 2 above doesn't make sense. It should read "I open the RS on 30th Jan" to match what is being discussed. You then do lose the difference between 5% and 6% on £250 for 15 days (10p), but gain the difference between 6% and 5% on £2,500 for 15 days on the other side (£1.03). That's comparing renewing the RS with £250 after having £2,750 in there for just 15 days vs 30, which compares like for like over the full 380 days under consideration.

Thank you for explaining.  I understand the benefit of opening and funding at the end of the month.  What I didn't understand is the advantage of delaying the first payment, as you pointed out "Version 2 above doesn't make sense".  I open RSs as soon as they are released because waiting can result in not getting it at all. Some of them have very short window for applying (best example is 7% MonBS that was available for only 1 or 2 days last year).  I thought most on here have the same strategy (i.e. opening the accounts on the day of release) and was wondering why people prefer to delay their first payment.