Regular Saver Accounts

carrotmuseum

I often see recommendations for high interest regualr savr accounts. Please note the interest is calculated based on the money in your account at the time of calculation, not the final lump sum at the end of the term. . So if the claimed interest rate is, say 6% the first payment only accrues 1/12th of 6%  the second balane get 2/12ths and so on.

So the ACTUAL interst paid out at the year end is significantly less than 6%

e.g. A regular saver account with a 7% AER might sound appealing, but if interest is calculated monthly and you save £100 a month, your average savings balance over the year will be around £600. The actual interest earned will be about half of the advertised rate, potentially around 3.5%. 

flaneurs_lobster

You make a valid point - it's addressed in this MSE article

https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

Mark_d

You are correct.  If you have £500 and are looking for a home for it, then regular saver probably won't be your best bet.
However if you wan't to save £100 per month out of your salary payment, possibly saving up for a holiday, then a regular saver would work.

The_Green_Hornet

carrotmuseum said:

I often see recommendations for high interest regualr savr accounts. Please note the interest is calculated based on the money in your account at the time of calculation, not the final lump sum at the end of the term. . So if the claimed interest rate is, say 6% the first payment only accrues 1/12th of 6%  the second balane get 2/12ths and so on.

So the ACTUAL interst paid out at the year end is significantly less than 6%

e.g. A regular saver account with a 7% AER might sound appealing, but if interest is calculated monthly and you save £100 a month, your average savings balance over the year will be around £600. The actual interest earned will be about half of the advertised rate, potentially around 3.5%. 

You may find this MSE article a useful explainer.

Regular savings accounts 2025: Earn up to 7.5%

Malchester

No no no. The interest you receive is 6%. You only receive interest on money in the account so you receive 6% on the money that is actually in your account each day. If I had a savings account paying 4.5% per year and put in £10,000 2 days before the interest payment date I would get 4.5% interest on that £10,000 for the time it is in the account. The interest rate is still the advertised figure.

flaneurs_lobster

Malchester said:

No no no. The interest you receive is 6%. You only receive interest on money in the account so you receive 6% on the money that is actually in your account each day. 

No you don't, you get 6%/365 per day interest. The annual rate of interest is 6%.

badmemory

I do wonder what they teach in maths classes these days though.  Obviously they avoid the practical.  I do remember though having a friend who couldn't figure out the area of anything (adult college classes) I asked her how many tiles she was going to need to tile her new kitchen.  It took her a few minutes but then daylight dawned.  I do sometimes wonder if we deliberately make it harder for some to get it, because some others like to feel smart.

Malchester

flaneurs_lobster said:

Malchester said:

No no no. The interest you receive is 6%. You only receive interest on money in the account so you receive 6% on the money that is actually in your account each day. 

No you don't, you get 6%/365 per day interest. The annual rate of interest is 6%.

Yes. I beg your pardon it was my bad explanation as I knew what you said was right 

slinger2

Of course the same's true with any savings account. If I have £1200 in a 6% account and take out £100 per month, I'm not going to get £72 interest over the year, only half that (roughly).

And it also applies to Mortgages. If I take out a £100,000 mortgage at 6% over 25 years, I'll be paying nearly £6,000 interest in the first year but, as I pay off the capital, I'll owe very little in the 25th year and so pay very little interest too.

Speculator

So the ACTUAL interst paid out at the year end is significantly less than 6%

you get exactly 6%.

kaMelo

carrotmuseum said:

I often see recommendations for high interest regualr savr accounts. Please note the interest is calculated based on the money in your account at the time of calculation, not the final lump sum at the end of the term. . So if the claimed interest rate is, say 6% the first payment only accrues 1/12th of 6%  the second balane get 2/12ths and so on.

So the ACTUAL interst paid out at the year end is significantly less than 6%

e.g. A regular saver account with a 7% AER might sound appealing, but if interest is calculated monthly and you save £100 a month, your average savings balance over the year will be around £600. The actual interest earned will be about half of the advertised rate, potentially around 3.5%. 

Just like every savings account, as far as I'm aware there are no savings accounts that pay interest on money you don’t have in the account.