Saving account interest question.

Bob2000

I know this may be a very basic question, but I'm new to savings, so here goes.
If l deposit  say £1200 into a saving account for 12 months at  say 5%, would l get a similar  amount of interest  if l had place £100 per month in a regular saver at 5% also?

MX5huggy

No the second option gets half the interest of the first because the average balance over the year is £600. 

penners324

Nope, the regular save would be about half the interest 

Rodders53

No,

1200 in for 12 months get 5% 12x5 = £60   
Total at the end is £1260

100 in for 12 months gets £6 at the end of the year.
100 in for 11 months gets less 11/12 of that £6
100 in for 10 months gets  10/12  and so on...
Total after the year will be £1232 = 1200 input from you and £32 of interest added.
https://www.moneysavingexpert.com/savings/regular-savings-calculator/

Bob2000

@Rodders53
So if it's better interest  in a 12 month account  why do so many folks on here get loads of regular saver accounts?

Bob2000

Bob2000 said:

@Rodders53
So if it's better interest  in a 12 month account  why do so many folks on here get loads of regular saver accounts?

Also thanks for the link and explanation. 

wmb194

Bob2000 said:

@Rodders53
So if it's better interest  in a 12 month account  why do so many folks on here get loads of regular saver accounts?

Because they pay better interest rates. You e.g. drip feed the money from a 5% instant access to >5% regular savers and overall earn more than if you'd left the money all year in the 5% instant access account. At the moment I have quite a few 7%+ regular savers.

Newbie_John

Bob2000 said:

@Rodders53
So if it's better interest  in a 12 month account  why do so many folks on here get loads of regular saver accounts?

If you have £3600 now and open regular saver (£300 a month, first direct 7%) then in first month you get interests only on £300 - and the £3300 earns 0% interest. Total £126.

If you have £3600 and put it on 5% account from day 1, you get £180 interest.

If you have £0 now, but able to save £300 a month from salary - then that's what is designed to.
Total £126.

Regarding first example you can do a hybrid.
From the 5% account you start withdrawing £300 a month - so will earn about half £90. But the. You will also earn full regular saver £126 - totalling £216.

When you have £50k savings then it could be too much hassle for all these regular savers as they're limited to 1 per account.

Flugelhorn

I think also you can put more in a 12 month account (usually) - often the regular saver ones are limited 

p00hsticks

Bob2000 said:

@Rodders53
So if it's better interest  in a 12 month account  why do so many folks on here get loads of regular saver accounts?

not everyone has the full amount available at the start of the year - it may be that the regular savings payments are coming out of their monthly salary ? 

Sarahspangles

Bob2000 said:

@Rodders53
So if it's better interest  in a 12 month account  why do so many folks on here get loads of regular saver accounts?

The logical next question is why banks and building societies pay better interest rates for regular savers? It’s because they want to get people saving - with them - and if you are tempted to open one account with them you might use them again for other things like current accounts, loans and mortgages.

Having a few regular savers is useful for people who have a bit of cash to save because cumulatively they earn more interest, and often banks and building societies have ‘loyalty’ accounts for people who already have one account with them.