Saving with interest

bonny1975 · 9 January 2019 at 2:00PM

Hello - not sure if this is the right place for this question, sorry if it isn't.

I wanted to ask if I am being thick - I am trying to put a little away each month in order to have a safety net if the worse should happen and I lose my job ( its unlikely, but best to prepare) I read somewhere that you should aim to get 3 months salary behind you, after tax this would mean I would need £7332. I am only just under 1/2 way there. Last year I took a savings plan with Santander - it was a monthly saver account, I had to put £200 in a month, by direct debit, and at the end they would pay 3% - I had worked out 3% to be £72, so should have ended up with £2472 - however they have just paid me £34.01, then another 20p the next day. I called Santander to ask what's happened - I spoke to three people who all said maths wasn't their strong point and said reading from their computer system that's correct? as I can see, even taking off the 1st month 3% of £200 would be £6, so surely I should be making £6 x11 - £66? they told me its worked out on a daily basis - but I can understand how this changes anything, the amount is the same?? they said they will post me the break down ( which also costs £10 to me!) Am I being thick , have I just got my maths wrong as I make £34.21 1.42 % of £2400 - I just don't get it - the app clearly states I will get paid 3% - any help appreciated.

Alter_ego · 9 January 2019 at 2:04PM

To earn the full annual interest on the whole amount you must have the whole amount in for the full year.

Your deposit in the last month was only in for max 1 month, 11th month was only there for max 2 months. And so on.

pinknsparkly · 9 January 2019 at 3:00PM

To get the full amount of annual interest would require ALL of the money to be in the account for a full year. Most of the money was in the account for much less than a year.

3% annual interest = 0.25% monthly interest (3% annual interest / 12 months).

As alterego has said, only the first £200 you put was there for the full year. The interest you will have earned will be (approximately, I'm assuming you made each payment on the first day of the month and all months have the same number of days in them!):

Jan savings = £200 x 3% (12 months interest) = £6
Feb savings = £200 x 2.75% (11 months interest) = £5.50
Mar savings = £200 x 2.5% (10 months interest) = £5
.
.
.
.
.
.
.
Nov savings = £200 x 0.5% (two months interest) = £1
Dec savings = £200 x 0.25% (one month interest) = 50p

Adding them all together = £6 + £5.50 + £5 + £4.50 + £4 + £3.50 + £3 + £2.50 + £2 + £1.50 + £1 + 50p = £39

bonny1975 · 9 January 2019 at 3:04PM

Thanks so much - that's all I needed to know - Santander just was not giving me any answers - If they had explained it like that I would have got it straight away! appreciate your help.
Kind regards.

Saving with interest

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