# Will this help me maximise my potential gains?



## lialwarrior (15 Feb 2008)

I have a lump sum of €50,000. I will need access to this money in 12 -18 months, so in the mean time I was thinking of the following;

Open 3 FA eSavings accounts (1 in both of our individual names and a joint account) and deposit €14900 in each @5.22% AER. At the same time open 3 FA Regular Savings accounts (again 1 in both of our individual names and a joint account) and deposit €1000 in each at 7.15% AER.

Then the theory would be to transfer €1000 into each of the Regular Savings accounts on a monthly direct debit basis from the eSavings accounts. 

I understand I would need to setup multiple direct debits, but by doing this am I maximising my potential gain or am I missing something glaringly obvious?


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## Slim (15 Feb 2008)

I think you will find that if you drip feed into the 7+% accs, from an account that pays more than 3.4% pa you will, in effect be losing money or at best making no gain. I calculated that t/f to Reg savings accs. at 7% equated to annual rate of 3.32%. Rabo and Northern Rock will give more than that.

Slim


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## Freddie (15 Feb 2008)

Slim I have a no. of reg saver a/c's set up and a few 5% deposit a/c's aswell. Am i better off lodging money to my deposit a/c's each month?


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## ClubMan (15 Feb 2008)

Slim said:


> I think you will find that if you drip feed into the 7+% accs, from an account that pays more than 3.4% pa you will, in effect be losing money or at best making no gain. I calculated that t/f to Reg savings accs. at 7% equated to annual rate of 3.32%. Rabo and Northern Rock will give more than that.
> 
> Slim


This is not true. Drip feeding from a 5.22% account into a 7% account will earn more than just leaving the money on deposit at 5.22%. You are not comparing like with like when you compare the total annual return on 12 monthly drip feeding lodgements against the same money on deposit for 12 months.

For example - if I have €12K and leave it on deposit at 5.22% then I earn €626.40 gross or €501 net of _DIRT_.
Say I make a single lodgement of €1K to a 7% account and then stop. That means that I get €11K @ 5.22% = €574.2 and €1K @ 7% = €70 which is €644.20 gross or €515.36 net. 

If I make two monthly lodgements then I have:

€10K @ 5.22% = €522
Second monthly lodgement on deposit at 5.22% for one month: (€1K @ 5.22%) x (1/12) = €4.35
First monthly lodgement: €1K @ 7% = €70
Second monthly lodgement: (€1K @ 7%) x (11/12) = €64.17
Total = €660.52 gross or €528.42 net.

And so on. I'm sure that there's an easier way to work it out but that's illustrative. (The actual calculations should use the monthly equivalent rate for the relevant _CAR _but the general gist should be the same).


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## The_Hustler (15 Feb 2008)

Slim said:


> I think you will find that if you drip feed into the 7+% accs, from an account that pays more than 3.4% pa you will, in effect be losing money or at best making no gain. I calculated that t/f to Reg savings accs. at 7% equated to annual rate of 3.32%. Rabo and Northern Rock will give more than that.
> 
> Slim



What about the money it's earning at 5.22% in the original account? You have to add the total interest it earns from each account it is in. i.e. an amount that's drip fed after 6 months has spent six months earning 5.22% and will spend the next six months earning 7+%.

Your calculation only makes sense if you took all your money out of the deposit account at the start of the year and then drip fed it.


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## ClubMan (15 Feb 2008)

The_Hustler said:


> Your calculation only makes sense if you took all your money out of the deposit account at the start of the year and then drip fed it.


You put it much more succinctly than I did!


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## lialwarrior (18 Feb 2008)

Thanks for the replies. Is this original plan at the start of the post a good way to go for 18 months or should I be looking at any other alternatives?

All comments welcome.


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## ClubMan (18 Feb 2008)

Drip feeding a high rate regular saver account from a high rate lump sum deposit account is a good way to maximise deposit interest returns. There are of course other savings/investment options but generally the higher the returns then then higher the risk and potentially the longer the timeframe involved. Without a lot more detail about your overall financial and personal circumstances it's almost impossible to say what might be the most appropriate savings/investments for your specific needs.


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## lialwarrior (19 Feb 2008)

Thanks Clubman for the reply. I am planning on using these funds towards a selfbuild house, so I am not in a position to invest for the longterm as I will need access to the money in about 18 months time.

I think I will go with the original plan, it beats leaving it in a cashsave account I opened when I was about 7 years old!

Thanks again.


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## ClubMan (20 Feb 2008)

lialwarrior said:


> Thanks Clubman for the reply. I am planning on using these funds towards a selfbuild house, so I am not in a position to invest for the longterm as I will need access to the money in about 18 months time.


So a mixed bag of the highest rate demand and term lump sum and regular saver accounts on offer with suitable terms & conditions sounds like the best option here.


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## tippergore (20 Feb 2008)

Perhaps the financial regulator should issue a calculator so people can assess whether this is a good way of insuring their money is not eroded by inflation. It seems to have a lot of people confused, and not many people have the time to work out these complex calculations.

Does anyone want to volunteer to write up a petition?


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## ClubMan (20 Feb 2008)

You mean a calculator for estimating the returns from monthly saver accounts for example? This one does that (some people have reported problems seeing this correctly).


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## tippergore (21 Feb 2008)

That is precisely the type I mean, but isn't this a calculator generated by AAM and not the Financial Regulator? 

Perhaps the link should be made as a sticky at the top of the Savings and Investment Forum as there has been a lot of posts regarding these calculations.


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## ClubMan (21 Feb 2008)

tippergore said:


> but isn't this a calculator generated by AAM and not the Financial Regulator?


No - it was created by this guy:

_[FONT=verdana, arial, helvetica][FONT=verdana, arial, helvetica]Professor Hossein Arsham   [/FONT][/FONT]_

and just referenced from here. What difference does it make that it's not from _IFSRA_?


> Perhaps the link should be made as a sticky at the top of the Savings and Investment Forum as there has been a lot of posts regarding these calculations.


There is already a link to the calculator page here:

 > A Compilation Of Useful Links > Various interest calculators


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## tippergore (21 Feb 2008)

Clubman,

It makes absolutely no differance to me whether the calculator is from the IFSRA or not,although it may be presented in more laymans terms if a calculator was created by the IFSRA. I am sure that there are people other than me who are not aware of this website (AAM) and who's first point of contact for information on how best to maximise potential gains would be the IFSRA website (which most likely has a link to AAM). 

I was not aware of this link for the calculators or how to access it through the AAM sub menus and it is clear that I am not the only one who has had this difficulty. It is merely a suggestion that may save time for moderators like yourself replying to repetative threads on this issue, and for people like me who use this very useful forum.

My point is simply, with so many high interest deposit accounts and saver accounts available perhaps it would be prudent to make ease of access to this calculator a priority for the savings and investment section of this forum to avoid the duplication of threads and help the users of this forum assess what the best way is to maximise their interest returns.

Tippergore


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