Regular Savings Calculator Issue?

kimwp

When I use the drip sum calculator and put a different number in for the lump sum, but keep everything else the same, the difference between drip feeding and not drip feeding changes. I would have thought the difference would remain the same, am I missing something?

Edit to add:

For example, you have 1 year, no tax, lump sum £3600 at 4%, regular saver £300 at 7% then the calculator says:

£££££££££££££££££££££___

After drip-feeding the cash for 12 months, you'd have earned...

£201 in interest

£135 from the regular saver + £66 from the normal savings account

If you'd kept the cash in normal savings without drip-feeding it, you'd have earned...

£142 in interest

£££££££££££££

>> A difference of £59

Now keep everything the same but double the lump sum to £7200:

£££££££££££££££

After drip-feeding the cash for 12 months, you'd have earned...

£345 in interest

£135 from the regular saver + £210 from the normal savings account

If you'd kept the cash in normal savings without drip-feeding it, you'd have earned...

£283 in interest

££££££££££££££££££

>> A difference of £62

Comparing drip feeding and not drip feeding:

Drip feeding: Interest earned from £3000 that stays in the account + interest earned from £3600 that gradually leaves the account

Not drip feeding: Interest earned from £3000 that stays in the account + interest earned from £3600 that could be drip fed but isn't being.

In both cases, the interest earned from the £3000 that stays in the account is the same, so the difference between drip feeding and not drip feeding shouldn't change when the amount that stays in the normal account changes.

surreysaver

Have you a link to the calculator?

kimwp

https://forums.moneysavingexpert.com/discussion/comment/81932472#Comment_81932472

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

surreysaver

Not sure if I understand your question, but if the lump sum changes, then depending upon how much it is, you may not be able to transfer it all to regular savers if it exceeds the monthly amount you can pay in.

If the AER of the regular saver is more than the AER of your account the money is already in, then you will earn more interest by drip feeding

crumpet_man

https://forums.moneysavingexpert.com/discussion/6660761/regular-savings-calculator

Because you have either increased or decreased the lump sum therefore your total interest will be higher or lower.

For example, you have 1 year, no tax, lump sum £3600 at 4%, regular saver £300 at 7% then:

After drip-feeding the cash for 12 months, you'd have earned...

£201 in interest
£135 from the regular saver + £66 from the normal savings account

If you'd kept the cash in normal savings without drip-feeding it, you'd have earned...

£142 in interest

Now keep everything the same but double the lump sum to £7200:

After drip-feeding the cash for 12 months, you'd have earned...

£345 in interest
£135 from the regular saver + £210 from the normal savings account

If you'd kept the cash in normal savings without drip-feeding it, you'd have earned...

£283 in interest

More money in the lump sum account means more interest earned. Am I stating the obvious or have I misunderstood the issue?

kimwp

https://forums.moneysavingexpert.com/discussion/comment/81932489#Comment_81932489

Thank you- so would you expect the differences between the two methods (drop feeding and not drip feeding) to be the same or different?

In the example you posted - starting with a lump sum of £3600, drip feeding results in a gain of 201-42= £59 Vs not drip feeding.

However, starting with a lump sum of £7200, drop feeding results in a gain of £345-283 = £62 Vs not drip feeding.

If in both cases the amount being drip fed is the same, I would expect the difference between drip feeding and not drip feeding to be the same, regardless of how much is in the lump sum that doesn't get drip fed. So what am I missing?

kimwp

https://forums.moneysavingexpert.com/discussion/comment/81932486#Comment_81932486

Thank you. Hopefully I've explained my question a bit better in my reply to crumpet man.

crumpet_man

https://forums.moneysavingexpert.com/discussion/comment/81932494#Comment_81932494

The more money that is in the normal savings account means that a smaller percentage of the total is being transferred to the regular saver and so the difference between drip feeding and not drip feeding increases with increases to the lump sum.

kimwp

https://forums.moneysavingexpert.com/discussion/comment/81932510#Comment_81932510

Thanks. My understanding is that the amount that remains in the "normal" account is irrelevant to the difference - because it (and the interest it generates) in both scenarios (drip feeding Vs not drip feeding) is the same.

Difference= (interest from the £3600 (drip fed) + interest from money that stays in the normal saver) - (interest from the £3600 (not drip fed) + interest from money that stays in the normal saver)

The interest from the money that stays in the normal saver is the same whether you drip feed or not, so that cancels out.

So in the example you posted-

Starting with £7200 means £3600 will be left in the normal saver at the end of the year. The interest on this £3600 will be the same regardless of whether the other £3600 also stays in the account or is drip fed.

surreysaver

If the lump is greater, but the amount you're drip feeding is the same, then the lump sum will generate more interest because there's more money. Therefore the difference between drip feeding and not drip feeding will be greater.

In the example used, £7,200 is more than £3,600, so will earn more interest. You are still only drip feeding £3,600 of the total, so that will still earn the same amount of interest, but the remaining £3,600 wasn't there before to earn any interest, but now it is

kimwp

https://forums.moneysavingexpert.com/discussion/comment/81932557#Comment_81932557

Thank you. I'm not sure I follow your reasoning.

Comparing drip feeding and not drip feeding:

Drip feeding: Interest earned from £3000 that stays in the account + interest earned from £3600 that gradually leaves the account

Not drip feeding: Interest earned from £3000 that stays in the account + interest earned from £3600 that could be drip fed but isn't being.

In both cases, the interest earned from the £3000 that stays in the account is the same, so the difference between drip feeding and not drip feeding shouldn't change when the amount that stays in the normal account changes.