Interest

[Hihosilver123]

Am I better to have most of my savings in one account with moderate interest paid annually, or spread the money around into higher interest accounts (that have a maximum monthly payment) with higher interest paid monthly.

Can’t get my head round the maths!

Interest paid monthly is better, as you will benefit sooner from compound interest if you leave it in the account.

Are you comparing regular monthly savings accounts versus a single upfront deposit? If so then you need to effectively halve the monthly saver interest rate to compare them fairly over the course of one year.

The interest rate for regular savers is only half of what is advertised.

For example if its 7%, it actually works out as 3.5%.

That's because

First month is in there for 12 months
Second deposit= 11 months
Third deposit = 10 months
Etc

Ok. Interesting points. So, essentially, it doesn’t make much difference. Is that right?

To get the most interest possible you should put it in the highest interest accounts as early as you can. So for example you put the maximum £300 every month into a regular saver at 7%. The rest of your savings you keep in a savings account and feed it into the monthly saver. When yhr monthly saver matures transfer it into your other savings account and start again with a new monthly saver. However, it's also a balance of your time and energy as to whether you think it's worth the effort.

Thank you. That’s really helpful.

The bank/building society factors that into the rate on the monthly interest account so that the AER matches the rate of their equivalent annual interest account.

And so you also need to add in any interest earned in the feeder account.

There's a useful online calculator here:

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

You could ask Chatgpt to work this out for you, if you understand what you're asking iyswim