Easy access savings interest


Thought I’d ask here as a I feel a bit silly! Please could someone explain how interest works in the easy access saver?

When I opened the account it offered about 1.15% interest, which was reduced to 0.56% due to the COVID recession. Fine. But I want to understand how the interest is calculated. I currently have £5000 saved and save about £500+ a month so it’s been quite a chunk of money for a while.

However, every month I only get about £2 in interest. 0.56% of £5000 is £28 so why do I earn so little? Even when I had the 1.15% interest I was still only earning about that much.

I’m sure this is just me being an idiot and not understanding interest maths so please could someone break it down for me?


The interest rate is annual so you only get a twelfth of it in a month.

There’s slightly more complexity than that, of course, but that’s the headline.


Thanks for the reply. So if I put £5000 in January and left it alone until December, I would earn £28 for the year but get paid £2.30 a month? It barely seems worth having a savings account over a current account!

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To break down the math for you, as you rightly put 0.56% interest on a balance of £5000 is £28.

£28 ÷ 12 ≈ £2.33.

A small amount is deducted to account for compounding interest (where your interest will start earning extra interest) so that it balances out over the course of the year to be £28, assuming you don’t add any extra money to it yourself.

That monthly amount will increase slightly each month as you add to your balance.


That is the reality of the long term low interest rates we’ve had for the last few years, unfortunately.


When I was deciding on a savings account in 2019 I saw so many articles weighing up the best interest rates varying from about 1-2%. It seems like only people who have a huge amount in savings will notice any difference between them all!

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If you are saving for the medium or long term peer to peer savings and investing in the stock market (which has a lot more volatility) have higher risks, though bigger potential gains, so it’s where some people are going to get better gains than cash savings.

You’ll need to do plenty research as there is a risk of getting back less than you put in.

Yes you are right but this isn’t a Monzo specific issue - interest rates are low across the board which means it’s good for borrowers right now and bad for savers, and this will not change any time soon. Monzo are the facilitator to these savings accounts also, they don’t set the rates themselves.

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