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    • redandwhitestripes
    • By redandwhitestripes 12th May 18, 11:35 AM
    • 38Posts
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    redandwhitestripes
    Are regular savings accounts worth it ?
    • #1
    • 12th May 18, 11:35 AM
    Are regular savings accounts worth it ? 12th May 18 at 11:35 AM
    I wasn't too bad at maths in my younger days although things are catching up on me a bit but I was wondering whether those regular savings accounts are actually worth using.

    I may be missing the point a little bit , but I did some back of a beermat sums and worked out that the Chelsea 2% at up to 500 a month equates to around 1% over the 2 years.
    I have a charter Savings easy access account at 1.31% , so may as well use that.

    The best ones I've found are the First Direct and and Nationwide ones.
    The TSB, Santander ones don't really offer much, and I only keep the Lloyds one because I like getting a free Empire magazine each month!.

    Just wondered your thoughts.
Page 2
    • No_6
    • By No_6 12th May 18, 9:28 PM
    • 637 Posts
    • 129 Thanks
    No_6
    @red.pipes
    we all go to the internet to find our answers
    and we get different answers....it's not a GOD
    • Fingerbobs
    • By Fingerbobs 12th May 18, 9:43 PM
    • 399 Posts
    • 103 Thanks
    Fingerbobs
    I'd suggest only worth bothering with once you've exhausted most of the regular saver and current account options.

    To make the best use of it you'd need to withdraw the 50 as well, otherwise you will have an increasingly large sum sitting in it only earning 1%.
    Originally posted by ValiantSon
    Agreed, only worth considering after other options are filled up.

    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.
    2018 Wombling Contestant 11: 5.30 (27/03/18)
    • Fingerbobs
    • By Fingerbobs 12th May 18, 9:49 PM
    • 399 Posts
    • 103 Thanks
    Fingerbobs
    There does becomes a time when they mature and that you have bucket loads of cash to find a home for.
    Originally posted by Joe_Bloggs
    I made that mistake last year, but this time around I am staggering re-opening them, so that one matures each month next year. Going forward, that method help cash flow during the year, and avoid the big blob of money suddenly needing a home.
    2018 Wombling Contestant 11: 5.30 (27/03/18)
    • ValiantSon
    • By ValiantSon 12th May 18, 10:25 PM
    • 1,892 Posts
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    ValiantSon
    Agreed, only worth considering after other options are filled up.

    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.
    Originally posted by Fingerbobs
    Yes, but the way around this is to pay in 50, receive the interest, then withdraw the 50 (plus interest) and then pay it in again for the next month's interest. Repeat each month.
    • RG2015
    • By RG2015 12th May 18, 11:28 PM
    • 1,221 Posts
    • 713 Thanks
    RG2015
    Yes, but the way around this is to pay in 50, receive the interest, then withdraw the 50 (plus interest) and then pay it in again for the next month's interest. Repeat each month.
    Originally posted by ValiantSon
    This would not work. The condition is not to pay in 50 per month but to increase the balance by 50 per month (as measured on the second last business day of the month)

    It is however the only instant access account to pay 1.50% on balances up to 5,000 from day 1.
    • ValiantSon
    • By ValiantSon 12th May 18, 11:38 PM
    • 1,892 Posts
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    ValiantSon
    This would not work. The condition is not to pay in 50 per month but to increase the balance by 50 per month (as measured on the second last business day of the month)

    It is however the only instant access account to pay 1.50% on balances up to 5,000 from day 1.
    Originally posted by RG2015
    It should do. If you pay the 50 in and receive the interest and then reduce the account balance by 50 plus interest then paying another 50 in would increase the balance again. Alternatively, you could leave the interest in the account and withdraw the original 50, and then pay it back in, thus definitely increasing the balance by 50, and then withdrawing it again after the interest is paid.

    Of course, all this faffing around just emphasises my view that the account is not that great. I can get 1.5% (2% until July) on 5,00 with Club Lloyds and don't have mess around to do it! If all the current account options are filled, then really people should begin to think about investments anyway, as they are holding large sums of cash and, even in an account paying 1.5%, losing value due to inflation.
    • Fingerbobs
    • By Fingerbobs 12th May 18, 11:57 PM
    • 399 Posts
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    Fingerbobs
    It should do. If you pay the 50 in and receive the interest and then reduce the account balance by 50 plus interest then paying another 50 in would increase the balance again. Alternatively, you could leave the interest in the account and withdraw the original 50, and then pay it back in, thus definitely increasing the balance by 50, and then withdrawing it again after the interest is paid.

    Of course, all this faffing around just emphasises my view that the account is not that great. I can get 1.5% (2% until July) on 5,00 with Club Lloyds and don't have mess around to do it! If all the current account options are filled, then really people should begin to think about investments anyway, as they are holding large sums of cash and, even in an account paying 1.5%, losing value due to inflation.
    Originally posted by ValiantSon
    Is it even worth worrying about "only" getting 1% on a mere 50 per month? If you're using this account, then there clearly isn't anywhere else you can stash your money that would pay any more than 1.5%, so you're only potentially "losing" about 1.50 per year on the 50 per month if you leave it in there, and that's assuming there is somewhere else you could have put that 50 per month that would pay 1.5% on it. It's negligible.
    Last edited by Fingerbobs; 13-05-2018 at 12:00 AM.
    2018 Wombling Contestant 11: 5.30 (27/03/18)
    • RG2015
    • By RG2015 13th May 18, 12:07 AM
    • 1,221 Posts
    • 713 Thanks
    RG2015
    The balance on the penultimate business day of the current month must be 50 greater than the equivalent balance for the previous month. You cannot take out 50 and then replace 50 and achieve this condition.

    Try it on a spreadsheet and you will see.
    • ValiantSon
    • By ValiantSon 13th May 18, 9:11 AM
    • 1,892 Posts
    • 1,754 Thanks
    ValiantSon
    The balance on the penultimate business day of the current month must be 50 greater than the equivalent balance for the previous month. You cannot take out 50 and then replace 50 and achieve this condition.

    Try it on a spreadsheet and you will see.
    Originally posted by RG2015
    Okay, I get what you are saying. You could pay a larger amount each month and then withdraw that.

    As to whether it is worth doing, there are plenty of other easy access savings accounts paying over 1%. As I've said already, however, with all the interest paying current accounts filled and regular savers subscribed to, there is a very strong argument to get money into investments rather than keeping even more cash that is losing value.
    • le loup
    • By le loup 13th May 18, 9:19 AM
    • 3,808 Posts
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    le loup
    I made that mistake last year, but this time around I am staggering re-opening them, so that one matures each month next year. Going forward, that method help cash flow during the year, and avoid the big blob of money suddenly needing a home.
    Originally posted by Fingerbobs
    That is the way to do it. You are then, essentially, recirculating the same lump sum.
    • veryintrigued
    • By veryintrigued 13th May 18, 9:38 AM
    • 2,380 Posts
    • 1,796 Thanks
    veryintrigued
    Apologies to veryintrigued if so

    Still, it's only a matter of time
    Originally posted by ColdIron
    No worries - apologies to those who didn't get my sarcasm!

    I'm a huge user of RS (and sarcasm)
    • karlie88
    • By karlie88 13th May 18, 11:08 AM
    • 8,382 Posts
    • 106,142 Thanks
    karlie88
    Regular saver rates are misleading!

    *hides behind several Virgin regular savers*



    They're misunderstood which can only be a good thing for many of us on the MSE savings board. It's quite a problem for many users on HUKD when someone posts a regular saver deal - they just can't seem to comprehend that you can't earn interest on money not present in the account.

    I thought it may be a generation thing i.e. younger people misunderstanding it. But having opened a few regular savers in branch at various building societies over the years, I've had many employees warn me that the interest 'is not going to be what you think it is at the end'. Workers have said to me that it's not uncommon for them to have queries about their interest payment once their account has matured (thinking it should be double the amount they've received). I ask what the typical age of these people are, 'over 60' is their reply.

    To the OP, you're not the first to ask whether reg savers are worth it and you won't be the last.
    Official MSE canny forumite and HUKD VIP badge member
    • EachPenny
    • By EachPenny 13th May 18, 3:39 PM
    • 4,986 Posts
    • 13,267 Thanks
    EachPenny
    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.
    Originally posted by Fingerbobs
    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%.
    Last edited by EachPenny; 13-05-2018 at 3:41 PM. Reason: Clarification.
    "In the future, everyone will be rich for 15 minutes"
    • nic_c
    • By nic_c 13th May 18, 4:02 PM
    • 1,459 Posts
    • 799 Thanks
    nic_c
    The idea really would be to have the lump sum in the lower interest a/c and drip feed it into the higher one. It will earn 1.315 From its time in one a/c and then start earning 2% once its moved across. Though with small sums involved and low interest rates, you are not talking a lot of difference. Is 2% the highest you can get?
    • veryintrigued
    • By veryintrigued 13th May 18, 4:24 PM
    • 2,380 Posts
    • 1,796 Thanks
    veryintrigued
    ... I've had many employees warn me that the interest 'is not going to be what you think it is at the end'. ....
    Originally posted by karlie88
    Ive encountered similar - with a staff member stating I'd be better off putting a lump sum into lower paying fixed account.

    I just inwardly shook my head.
    • LXdaddy
    • By LXdaddy 14th May 18, 1:39 AM
    • 682 Posts
    • 420 Thanks
    LXdaddy
    Put the following formula into Excel and it will give you your total balance at the end:

    monthly deposit*((1+interest rate)^(Number of months/12)-1)/1-(1+interest rate)^(-1/12))
    Originally posted by ValiantSon
    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.


    Edit to correct the calculation
    Interest earned = monthly deposit * 6.5 * interest rate

    The first deposit is in the account for 12 months
    The second is in the account for 11 months
    third for 10 months
    fourth for 9 months
    etc
    last deposit for 1 month

    So on average the deposits are in the account earning interest for 6.5 months.
    Last edited by LXdaddy; 15-05-2018 at 8:11 PM.
    • beefturnmail
    • By beefturnmail 14th May 18, 10:37 AM
    • 696 Posts
    • 222 Thanks
    beefturnmail
    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.
    Originally posted by LXdaddy
    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!
    Last edited by beefturnmail; 14-05-2018 at 10:41 AM.
    • Jibeddy
    • By Jibeddy 14th May 18, 1:26 PM
    • 72 Posts
    • 39 Thanks
    Jibeddy
    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)
    Originally posted by beefturnmail
    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+
    • beefturnmail
    • By beefturnmail 14th May 18, 2:49 PM
    • 696 Posts
    • 222 Thanks
    beefturnmail
    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+
    Originally posted by Jibeddy
    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
    • By No_6 14th May 18, 10:09 PM
    • 637 Posts
    • 129 Thanks
    No_6
    so to go back to the start,
    their is not a lot of interest due

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