Halifax savings calculator

I attempted to use the Halifax Mothly saver calculator with 7% AER. I put in initial deposit amount of €10 and monthly savings of €500. It calculates for 1 year and it shows that I will get interest of €228.20.

I do not understand how this is done. I have set up an excel sheet that calculates savings with compound interest and I come up interest amount of approx double that of €228.20.

Where did I go wrong?

Hi Shaz

Are you saying that you get nearly €450 interest over only 1 year? - To do a quick sanity check - a high level calc in the head - you would need to have around €6k deposited from day 1 to generate that. whereas you wont reach 6k until the end of the year at €500 pm

Could you post each months amount and the calc you have against it? It would be easier to pinpoint if anything is incorrect


Paddy

I suspect you have calculated the total amount at the end of the year by 7%, €6000X7%=€420.

You will only have €6000 in the account for the 12th month. You have to calculate it for each month, €6000X7%/12=€35, €5500X7%/12=€32, €5000X7%/12=€29 etc. and add them together and you'll get the correct amount. You only get interest on what is in actually in the account, they won't give you a years interest on whats only be sitting in the account 1 month.

Hope that helps!

Shaz, remember to subract the DIRT also to get your final figure

A simple way I calculating interest on regular savings account is to take your monthly contribution (€500) and multiply by 6.5. Multiply this final number by the interest rate (7%) and you will get the annual interest that should be accrued to your account (before DIRT).

Why 6.5? Well the in the first month you get a full years interest (12/12) in the second you get 11 months interest on that portion…and so on. 12/12 + 11/12 +…+ 1/12 = 78/12 or 6.5.

So to check:

€500*6.5*7% = €227.5
€10*7% = 70 cent (interest on initial deposit of €10)
Total interest accrued €228.2

Well that's definately a quicker method than mine!