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13th Regular Savings Payment Trick

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  • ColdIron
    ColdIron Posts: 9,831 Forumite
    Part of the Furniture 1,000 Posts Hung up my suit! Name Dropper
    masonic 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.
    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.  
    I don't open the account say, mid month, and delay payment until the end, that would achieve nothing. Quite the opposite, I would have less money at a higher rate for less time
  • masonic
    masonic Posts: 27,216 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    edited 21 April 2024 at 10:41AM
    masonic 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.  
    Then you are talking at cross purposes with everyone else. There is no benefit to leaving an open account empty. In most cases RS that allow 13 payments are available on a semi-permanent basis, so delaying a few days is very little risk. There may be some that are limited supply from the more obscure BS, but these are the exception rather than the rule. If an account needs to be pulled within the first month, then whomever set the rate made a terrible mistake. For the likes of Lloyds, Halifax, Nationwide, Co-op etc, delaying the application is a no-brainer.
  • Bridlington1
    Bridlington1 Posts: 3,742 Forumite
    1,000 Posts Third Anniversary Photogenic Name Dropper
    masonic said:
    masonic 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.  
    Then you are talking at cross purposes with everyone else. There is no benefit to leaving an open account empty. In most cases RS that allow 13 payments are available on a semi-permanent basis, so delaying a few days is very little risk. There may be some that are limited supply from the more obscure BS, but these are the exception rather than the rule. For the likes of Lloyds, Halifax, Nationwide, Co-op etc, delaying the application is a no-brainer.
    Though there are some regular savers (Co-op is one of those if I'm not mistaken) which starts the account term from the day you make your first deposit, rather than the date you actually apply, so it could be advantageous to open the account as soon as it is launched to secure the product and then delay the first deposit till the end of the month, thereby getting the best of both worlds.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    100 Posts Name Dropper Photogenic
    edited 21 April 2024 at 10:56AM
    Can l ask a question that isn't  really about this thread.
    I opened a natwest digital regular saver and put the max £150 in the first  month, but from now on, I'll  only be putting £100 will l gain much by doing this?

  • friolento
    friolento Posts: 2,413 Forumite
    1,000 Posts Second Anniversary Name Dropper Photogenic
    edited 31 October 2024 at 1:46PM
    Can l ask a question that isn't  really about this thread.
    I opened a natwest digital regular saver and put the max £150 in the first  month, but from now on, I'll  only be putting £100 will l gain much by doing this?


    Where would you keep your £100 if you didn't put it into the 6.12% account?
  • In my current account.
    The only reason lve got the natwest account  is l had the switch offer and l needed/wanted a regular/monthly saver.

  • Bridlington1
    Bridlington1 Posts: 3,742 Forumite
    1,000 Posts Third Anniversary Photogenic Name Dropper
    edited 31 October 2024 at 1:46PM
    In my current account.
    The only reason l've got the NatWest account  is l had the switch offer and l needed/wanted a regular/monthly saver.
    In that case you'd be losing out by not maxing out the regular saver. There isn't a single current account paying in credit interest anywhere near 6.12% at the moment (or even more than just the top paying EA account).

    I would move the entire contents of your current accounts into savings accounts ASAP, you're currently in effect throwing interest down the drain by keeping money in there.
  • [Deleted User]
    [Deleted User] Posts: 0 Newbie
    100 Posts Name Dropper Photogenic
    edited 31 October 2024 at 1:46PM
    In my current account.
    The only reason l've got the NatWest account  is l had the switch offer and l needed/wanted a regular/monthly saver.
    In that case you'd be losing out by not maxing out the regular saver. There isn't a single current account paying in credit interest anywhere near 6.12% at the moment (or even more than just the top paying EA account).

    I would move the entire contents of your current accounts into savings accounts ASAP, you're currently in effect throwing interest down the drain by keeping money in there.
    I meant that £100 is all l can manage  to spare for the natwest account. From my current account. 

  • allegro120
    allegro120 Posts: 1,873 Forumite
    1,000 Posts Second Anniversary Name Dropper
    edited 31 October 2024 at 1:46PM
    Can l ask a question that isn't  really about this thread.
    I opened a natwest digital regular saver and put the max £150 in the first  month, but from now on, I'll  only be putting £100 will l gain much by doing this?

    Yes, £100 is better than nothing.
  • friolento
    friolento Posts: 2,413 Forumite
    1,000 Posts Second Anniversary Name Dropper Photogenic
    edited 31 October 2024 at 1:46PM
    @[Deleted User]

    If you put £100 into your Natwest Digital Saver on the first of each month, and keep the money in there, you will have earned £39 after a year - if Natwest keep the interest rate at 6.12%. Assuming your current account pays no interest, you would have earned nothing - and you might even have spent some or all of your monthly £100.

    If you use the COOP or First Direct Regular savers, you can make £45 as they pay 7%. First Direct is a Fixed Rate, too - and they pay you at least another £45 if you open their pre-req current account via Topcashback. Unfortunately, their current switch offer ends tomorrow, so unless you want to dive in at the deep end and request to switch your existing current account today, you won't get another £175 on top of it. But you should be able to bag £45 + £45 = £90, even without a switch

    You can use the Moneysavingexpert Regular Saver calculator to play with different scenarios for the Regular Savers.
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