An update on getting interest paid on savings

I understand Monzo’s approach of having it as a separate ‘account’ managed within the app. However I do agree with you, I would much prefer Starling’s approach as they keep their Goals as part of your balance, and therefore don’t charge you overdraft fees because they know you have the money as well as a number of other benefits.

It’s just a different view of pots. Monzo’s approach, I find helps me manage balances a bit better because I have a savings pot which I don’t touch and it doesn’t show as part of my balance. But I have a pot that I put my cost of my bills in each month which comes out of that pot first thing the morning the Direct Debit is taken.

So I guess what I’m saying is that I would like a switch to include pot in balance and an option to lock a pot :sweat_smile:

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I get the feeling they created pots when they thought savings accounts were nearer, or they thought they’d be easier to integrate. It makes sense that the amount in a pot wouldn’t be included in your balance if it was segregated in a different company’s balance sheet offering it’s own rate of interest.

Instead, because of the delay, it’s confusing that it’s held with Monzo, counted towards your total balance but doesn’t count if you go overdrawn. Instead there’s friction where you get a notification that you’re going overdrawn but have to manually move the money from the pot to cover it. Maybe then notification should say something like “you’re going overdrawn but you have £10 in pots, shall we transfer money from them?”

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Why do you want Monzo to be the same? If Starling works better for you, use Starling, surely?

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Could easily be other (maybe more) features in Monzo that they prefer over Starling

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This is one of those situations where I think you need to try to think about what the future might hold.

I agree that, in the current world, pots as part of my current account balance would be preferable. Especially if they are all interest bearing.

But fast forward to a world where Monzo pots are perhaps held by other providers, or there’s a marketplace to choose from. In that world it would become super confusing to know what’s part of your current account and what isn’t. As this is - I think - the world that Monzo is aiming for, then it’d be confusing to train customers to expect pots to work one way, then change it as Monzo develops.

I get the sense that Starling has more or less finished development, and that model seems to work for them. It’s nice to have a choice between two different approaches, I think.

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I don’t like Starling’s ethics and approach to customers, eg. closing their forums, their support being rubbish. I want a bank with the ethics of Monzo and the features of Starling. I feel like it would be easier for Monzo to improve technical features than it would be for Starling to fix their mindset.

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My idea of an optimal market place implementation is that I don’t know (in normal day-to-day usage) that I’m using a 3rd party for some functionality or offering. Ie. perfect, seamless integration.

If the implementation is “open a separate sub-account for provider X, and access features of X in that area according to their rules”, it’s not much different to (and potentially worse than) using X directly in their own app.

Thinking about savings pots in particular, you may want pots from different market place providers if they had different limitations (eg. you want instant access, no minimums for all your budgeting pots, but higher interest and stocks&sharesISA pots for your “real” savings), but I don’t see a confusion issue if it’s done the way I imagine Starling would do it: just have another tab for Pots that aren’t part of your current account.

Starling switched from having a flat Goals screen to having a “Spaces” screen that then lets you switch between Goals - money you have - and Loans - money you don’t have -, which could presumably also house savings that aren’t part of your current account. You get a summary at the top of each section, so you can easily see how much money you have currently, and what type of thing you’re looking at.

Starling’s interest is only 0.5%, and even then that’s up to a certain balance - after that it’s 0.25%.

To get £2.50 in one month, you must have a decent sum in there even though you say you’re not rich.

If you really are not rich, then with capital of that size you want to earn interest on, there are better options for placing it than Starling if interest is what really matters to you.

I don’t think Monzo have got it wrong with pots. By having no interest on the account, it means that they’re broadly encouraging users to use pots for short-term goals - putting money aside to save for a holiday, or to ensure certain bills are covered, say. But with the option of the special pot (coming soon?) for earning interest if people want to lock larger sums away for a longer period.

I’m still interested in seeing what Monzo come up with for their interest bearing pot, though I have to confess that they’ve taken too long to release it for me and the money I had set aside has instead gone to Marcus. I also have a linked savings account with my legacy bank.

If Monzo applied interest to all their pots at the same rate Starling do? I wouldn’t be earning significant amounts of interest at all, single pounds at best. I accept that to an extent I am ‘paying’ for the convenience of pots, but at the level I am, it’s an acceptable trade-off for me. If I found my combined pots reaching a level where I would quite like to earn interest, I’d be moving the money to one of my savings accounts instead.

tl;dr, small amount of interest at Starling could trap you into keeping money there when it is better off being saved in a different account, as interest rates go.

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If 0.5% was paid on all the balance then you would need an average of 6,000 all month but like you said, most of the balance will only be accruing 0.25% interest so would need to be more. There are much better places to be keeping that amount of money if you’re worried about interest.

A 1.5% interest account will give you about 7.50 a month.

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When do you become “rich”? I wish I had 6 grand or more stashed in my bank account, whether in goals or pots!

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As I noted, my real savings are in a (stocks&shares) ISA. The 22 goals are all for envelope budgeting: short term (max 1 year) bill payments and other needs that I can’t lock away anywhere.

For this usage, the clarity and convenience of having all those goals in one place (as opposed to spread out in to different slightly better interest savings accounts), ready to put back in to my current account on a moments notice, is more than worth it.

Before Starling Goals, I had no savings at all, had no budgets, and couldn’t handle non-monthly bills. Goals literally saved my financial life. That’s a service I’ll sacrifice a percent of interest for.

But it’s still nice to be earning some interest on all of it, so that it doesn’t seem totally dead. It’s a nice little psychological reward every month, even if it’s only a few quid.

Of course, if Starling’s market place enabled a particular Goal to earn higher interest by seamlessly integrating with an external provider, I wouldn’t say no to more free money. As long as day-to-day it made no difference in terms of usage (still just as convenient and clear how much money I had left in that Goal, at a glance).

The critical thing is to be able to keep these things as 22 separate items (with custom names and pictures!), not all lumped in to one savings account that I can’t manage without a spreadsheet.

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UK inflation is currently 2.7% so all UK cash savings accounts will lose you money, especially if tax has to be taken into consideration. I would not expect Monzo to be any different. My own bank offers a deposit account of 0.4% which is laughable.
If you don’t mind taking a small degree of risk you can get 5% to 6% tax free in an ISA with a P2P lender or a corporate bond fund. These will give you liquidity and a modest real return after inflation, and you won’t pay tax.

No one is ever going to make any money by sitting on risk-free cash, in fact inflation guarantees that you will lose money. If you can live with the ups and downs then equities are the only way to make real returns over the long term. If you can’t risk anything then you might as well leave it in a zero interest current account.

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Sounds like you have more money than many of us!

As a minimum, anyone would be better off with some interest rather than none. It’s maths.

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I wouldn’t say it’s not worth it…Even if the interest rate is below inflation at least its an interest rate which is helping stem the the damage to the value of your money.

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Of interest to those speculating Shawbrook may be the Monzo partner - they’ve just increased the AER on their Easy Access account to 1.4%

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Maybe this is whats caused the delay.

While this is of course true, and when I pointed out here some months ago that Starling actually paid some interest I was howled down, and the founder’s brother-in-law pointed out that the Starling interest would only buy a few pints of beer. To which my response was that a few pints was better than no pints. Regardless, anyone with cash on bank deposit is guaranteed to lose money, so it’s not a great idea unless you are totally risk averse.

Yes, it’s something, but if the alternatives are 0.5% or 1%; or 5% or 6% tax free, why not take the 5% or 6%? No bank will offer the latter deal for deposit money.

This seems quite possible. The Shawbrook 1.4% is quite generous compared to most banks (although it still guarantees that you lose money in real terms, especially after tax) and has a £1000 minimum deposit, in line with what Monzo is proposing.