Are regular savings accounts worth it ?

Fingerbobs wrote: »

I don't think you can withdraw the monthly £50 and still get the interest - it looks like the balance has to increase by £50 every month? That's how I read it anyway.

The balance on the second-last working day has to be £50 more than the balance on the previous month's second-last working day. In between those dates you can add and withdraw money as you wish.

This gives a variety of valid methods for managing the account.

My own preference at the moment is to make a withdrawal on the third-last working day to reduce the balance down to no more than £50 more than the previous month. So month 1 the relevant balance was £50, month 2 it was £100, month 3 £150. However on the other days of the month the account balance is £5000 and therefore earning maximum interest at 1.5%. (For the two or three days it isn't earning 1.5% in the Savings Builder it is earning 1.35% with Tesco.)

The advantage of that approach is if your RS accounts are being too greedy, and none are paying out that month, then the Savings Builder can be drawn right down. But any residual balance will still get 1.5% so long as on that crucial second-last working day the balance is topped back up to £50, £100, £150... etc.

Locating a 'spare' few hundred quid for that second-last working day is much easier to do than having to find £5000 plus 'X'-months x £50, especially if the £5000+ is having to be taken out of an account paying more than 1.5%.

LXdaddy wrote: »

Or you could use the formula:

monthly deposit * 6.5 * (1+interest rate)

This assumes the months are the same length, the deposits are equal and made on the earliest date each month, and no withdrawals. These assumptions won't be true so its a close approximation.

I presume this is for working out the interest received (not total balance as the calculation in the previous post is for?) If so, shouldn't it actually be

monthly deposit * 6.5 * (interest rate/100)

You can also use this to to out interest received on the donor account you drip feed from, and therefore total effective interest rate.

E.g. If you have a lump sum of £3k you can drip feed from an account paying 1.3% to a regular saver paying 5% and allowing deposits of £250 per month

Interest on the regular saver is £81.25 + £21.13 on the donor account

So total interest of £102.38 on £3k, which is an effective rate of around 3.4% - so definitely worth it IMHO!

Jibeddy wrote: »

This just adds an extra step into the process, say for 1.5%:

1.5% = 0.015 or 1.5% = 1.5/100 = 0.015

The 1+interest would be to determine the final value of the account rather than the interest paid, if you just want to know the interest you take out the 1+

the formula given by LXDaddy doesn't work though e.g. on M & S' Regular saver, 250 x 6.5 x 1.05 it works out as final balance of £1,706.25 and given that you put in £3,000 (250 x 12), it's obviously not right!

Splitting hairs, but dividing by 100 doesn't really add in an extra step - OK so 5% and 0.05 are the same, but I've never seen a bank quote an interest rate of 0.05 - they say 5% - so you have to divide the 5 by 100 or the calculation does't work.

No_6 wrote: »

so to go back to the start,
their is not a lot of interest due

So to go back to post 37. There's more interest due than if you left it sitting in an easy access account.