Where will I make more interest?

surreysaver

MikeJXE said:

A twisting of words make no difference to the outcome 

It's not a twisting of words. If it says it pays 8%, then it pays 8%. 
Because you haven't got £3k in the account at the beginning, only at the end, this is what confuses people.
What isn't in the account paying 8% should be in an account paying about 5% waiting to be paid into the higher earning account, in order to maximise interest.

AmityNeon

MikeJXE said:

A twisting of words make no difference to the outcome 

How you summarise an outcome is important, otherwise it conveys the wrong impression and leads people to mistakenly believe that depositing all funds into a lower-rate rate account is the better option. What's "stated" is the contractual rate of interest a provider pays in interest; your "half" (or more accurately 54.167%) assumes the final-month balance is held in the account for the entire year, when in practice, the funds are held elsewhere (or have yet to even be received).

Exodi

mademe said:

I currently have 3 savings accounts:
1 at 5.25% opened in Nov last year but I can only deposit £400 per month, interest paid annually
1 at 8% opened in Nov last year but I can only deposit £200 per month, interest paid annually
1 at 3.93% opened and I can make unlimited deposits, interest paid monthly

I work part time due as I have small children and save what I can - usually I can pay the £400 and the £200 and then any extra goes into the 3.93% account. I currently have nearly £3000 in this account.

I'm getting very confused as to whether it makes sense to do as I am now by paying the full maximum deposits in the higher accounts, or whether to just put all of my money from the different accounts and future savings in the 3.93%? I really don't understand how to work out the maths, or is it just the case that the higher interest accounts are better, even though you have a maximum amount you can pay in?

Is there an easy-ish way to work out what the interest would be? I know it won't be much anyway but it will make a difference and with my limited savings I would like to make the most interest as possible! Thank you

This comes up a lot.

Simple answer: bigger number = more interest

Longer answer: the issue is people very rarely compare apples with apples on these accounts, so to compare £100 put into each of these accounts monthly:

5.25% returns £34.12 in interest over a year
8% returns £52.00 in interest over a year
3.93% returns £25.85 in interest over a year (and I've factored in that interest is paid monthly).

The reason people often get confused and give regular savers a bad rap, is because they do not consider that the money is drip fed into regular savers (and often ignore that the difference could be put in a savings accounts in the interim), so commonly think they are being conned when their 8% regular saver does not pay them 0.08*£2400 = £192 in interest (because £2400 wasn't in the account for a whole year).

I use excel and the FV function a lot, but a more user friendly approach could be using a calculator site like:
https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php (please input the numbers carefully, it's very common people get the compound frequency wrong).

Using this we can confirm the numbers Digital_Payback provided above.