Regular savings account verses standard savings account

Cobbler_tone

Just putting this out there. I am sure there are some very savvy people on here but some may be drawn in by the high rates that are always around on regular savings accounts.

I always have a sniff around but when you model the impact, if you have any savings of a modest level I've never found one that works out favorably. I don't chase pennies, so not bouncing around every 5 mins to the latest offer.

I looked at Zopa (only because I have an ISA with them and it popped up on my app) offering 7.5% on up to £300 per month.
Comparing to starting with £6k elsewhere on a boosted Chase 4.5% rate. The impact of putting £1k a month to this, or £700 to it and £300 a month to the 7.5% account left you worse off after 12 months.

I know all situations/numbers are different but ultimately the emotional lure of these rates can override the maths.

I can only think these rates only ever really work for those starting out on their savings journey, where they are a great product.

Middle_of_the_Road

Cobbler_tone said:

Just putting this out there. I am sure there are some very savvy people on here but some may be drawn in by the high rates that are always around on regular savings accounts.

I always have a sniff around but when you model the impact, if you have any savings of a modest level I've never found one that works out favorably. I don't chase pennies, so not bouncing around every 5 mins to the latest offer.

I looked at Zopa (only because I have an ISA with them and it popped up on my app) offering 7.5% on up to £300 per month.
Comparing to starting with £6k elsewhere on a boosted Chase 4.5% rate. The impact of putting £1k a month to this, or £700 to it and £300 a month to the 7.5% account left you worse off after 12 months.

I know all situations/numbers are different but ultimately the emotional lure of these rates can override the maths.

I can only think these rates only ever really work for those starting out on their savings journey, where they are a great product.

That is not correct. It's simply not possible.

refluxer

Cobbler_tone said:

Comparing to starting with £6k elsewhere on a boosted Chase 4.5% rate. The impact of putting £1k a month to this, or £700 to it and £300 a month to the 7.5% account left you worse off after 12 months.

The £300 you put into the Zopa RS each month will be earning an extra 3% interest so you will be better off overall, not worse off.

Stargunner

You can only pay a maximum of £300 per month to the regular saver. 

If you were to leave your savings where they are and transfer £300 per month from your savings to the regular saver you would earn more  interest than leaving your savings where they are. 

Bobblehat

I'm not sure what your point is? I'm not starting out on my savings journey, that happened decades ago, and I'd regard my savings as a modest sum. Like many others on here, I use Regular Savings Accounts all the time and have up to a dozen (variable) on the go at any time. We wouldn't be doing that if it wasn't to our advantage.

Try using the MSE Regular Savings Calculator and see if the numbers are attractive to you.

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

surreysaver

You've probably only done half your sums. Where are you keeping the £3,300 that you haven't put in the Zopa account that you've just opened?

ColdIron

Cobbler_tone said:

Comparing to starting with £6k elsewhere on a boosted Chase 4.5% rate. The impact of putting £1k a month to this, or £700 to it and £300 a month to the 7.5% account left you worse off after 12 months.

7.50% will earn less than 4.50%?

Care to show us your maths?

exel1966

Cobbler talking Click bait Cobblers!

Cobbler_tone

Why I love this forum! 

Perhaps my bad and was looking at compounded interest. Must be pennies in it.
e.g. £6,500 at 4.5% vs £6,200 at 4.5% + £300 at 7.5%, then add £1,000 to £7,500 at 4.5% vs £6,900 at 4.5% + £600 at 7.5% (plus all relevant compounded interest). 

ColdIron

Probably worth mentioning that most regular savers do not compound, i.e. they don't pay monthly interest. They don't need to as the gross is the same as the AER

So apart from the obvious advantage of the higher rate it's an apples and pears comparison anyway

JGB1955

Transferring £300 per month, for 12 months @ an additional 3% results in (roughly) an additional £58.