Regular Savings real interest question


G

Guest

Hi - I've got a one year fixed rate 8% AER / 6.4% net regular savings
account and I think I've just realised the percentages are all a bit of a
con from what I was expecting and would just like some help checking my
workings.

Terms: You are able to pay in up to £250 a month.
In month 1 you are able to pay in £500 extra as well.
Total amount possible to pay in over the whole year: £3500

At the end of the year, I think the max net interest earned would be £138.13
(6.4% /12 and added onto each month's balance - i.e., monthly balance
increasing by 0.53%).

So, after paying in £3500 at the end of the year, you'd get £3638.13 - an
increase of 3.95%. Which, if correct, is utterly paltry to the 6.4% you
think you'd be getting and to catch people's eyes with 8% is pure marketing
genius!

I feel really conned. Can anyone tell me if my workings are correct?

I see from the Money Saving Expert site that its not all doom and gloom if
you already have the £3500 in another high interest savings account (
http://www.moneysavingexpert.com/cgi-bin/viewnews.cgi?newsid1108401263,93536, )
, and then drip-feed it into the regular savings account, but if you don't
have that money already saved up, then according to my calculations, you
surely are way better off putting all the money on a regular basis into the
highest paying ISA you can get and then put any extra into the highest
savings account you can find. And only then stick that money into a regular
saver after that.
 
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J

John Boyle

In message said:
Hi - I've got a one year fixed rate 8% AER / 6.4% net regular savings
account and I think I've just realised the percentages are all a bit of a
con from what I was expecting and would just like some help checking my
workings.

Terms: You are able to pay in up to £250 a month.
In month 1 you are able to pay in £500 extra as well.
Total amount possible to pay in over the whole year: £3500

At the end of the year, I think the max net interest earned would be £138.13
(6.4% /12 and added onto each month's balance - i.e., monthly balance
increasing by 0.53%).

So, after paying in £3500 at the end of the year, you'd get £3638.13 - an
increase of 3.95%. Which, if correct, is utterly paltry to the 6.4% you
think you'd be getting and to catch people's eyes with 8% is pure marketing
genius!
???


I feel really conned.
I dont see why. You havent had the £3.5k in the account for the whole
year. You get 8% per annum gross on the amount you actually have in the
account throughout the year, not just the amount you have in on the last
day. How did you think it would work?
Can anyone tell me if my workings are correct?
I get £139.02.
 
G

Guest

I feel really conned.
I dont see why. You havent had the £3.5k in the account for the whole
year. You get 8% per annum gross on the amount you actually have in the
account throughout the year, not just the amount you have in on the last
day. How did you think it would work?
! True.

Sorry, you'll have to learn to adjust to me - I'm from the "want it all"
generation and only have half a brain (which is perhaps more financially
dangerous than having no interest at all in finance!).
I get £139.02.
Ah yes, that'll be the rounding (the 6.4% / 12 was 0.53% recurring, not just
0.53%), which adds up.

Thanks for the clarification - so the account in question really is better
than say, an ISA paying 5.3% net interest (being topped up at the same rate
per month, over the same period)?
 
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J

John Boyle

In message said:
Ah yes, that'll be the rounding (the 6.4% / 12 was 0.53% recurring, not just
0.53%), which adds up.

Thanks for the clarification - so the account in question really is better
than say, an ISA paying 5.3% net interest (being topped up at the same rate
per month, over the same period)?
Yes.
 

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