Regular Saver - how do you calculate interest?

[Cindy34]

When a bank offers a regular saver account, at say 3% apr, how do you work out what the interest would be?

For example, paying in 200 each month, for 1 year.
It would not be 3% of 2400, as there is not 2400 in the account until the final month.

If you had 2400 to invest, would it be better in an ISA paying say 2% or put into a regular saver drip by drip, with regular saver at 3% - how do you work it out?

If you put the same amount in each month calculate the interest at half of the total cash paid in,

Ie £200 pm = £2400pa. Interest at 3% approx £36. Less 20% tax = £29.
ISA £2,400 in up front @ 2% = £48.

Plus the ISA money stays in and keeps earning interest.

I have a number if regular savers each year, but I use up my isa cash allowance first (basically last years regular savers go straight into an ISA).
I only take them out if I can get a better rate than I would elsewhere, and am drip feeding excess income not holding capital to feed into them.

I've actually just been looking at rates as mine are finishing in Apr, you can get 6% on some accounts if you hold a current account. But mostly they are at 3%, which is what I am getting on my current account anyway.

Another way to do this is to take £200 multiply by the interest rate, divide by 365 and multiply by the number of days in the month.

So £200 invested on 1st Jan would earn 51p gross in January.
£400 (February) would earn 92p gross. £600 (March) would earn £1.53 and so on. If the interest was applied to the account at the end of March you would add 51+92+1.53 = £2.96 gross = £2.37 net.
Thus your April interest would be calculated on £802.37 assuming tax is paid.

If you pay in on different days every month, you calculate the number of days between payments and use that in your sum.

This can be a faff to calculate, but is useful for accounts when interest rates are banded according to the balance held.

Easiest way to do it is to use one of the many online interest calculators. There's one here for example.

SPREADSHEETS are your friend
then you can set the parameters and see where you are at any time

I should probably do a savings one ....

Thanks. Looks like I should use ISA allowance first before considering regular saver.