# First direct interest example

Can someone explain the maths here?

Interest example : if you save £300 every month for 12 months and qualify for the 5% interest rate, you’ll earn approximately £97.50 interest (gross).

So however I work it out, I can’t get £97.50.

300 x 12 = 3600. 5% of 3600 = £180
5% of 300 = 15 x 12 = £180

https://www2.firstdirect.com/1/2/savings-and-investments/savings/regular-saver-account

on the first month you only have £300 in earning 5% / year, on the last month you have £3600 in earning 5%/ year , so roughly only 6 months with the full amount £3600 in @ 5% = (£3600 x 5% / year ) / 2 = £90 + a bit of compound interest - ish

or on average £1800 in for the full year - £1800 x 5% per year = £90 + a bit of compound interest on the monthly payments would get to the £97

6 Likes

Yes you only earn interest on what’s in the account. And the account doesn’t have £3,600 in it for 365 days.

2 Likes

Makes more sense now - I was calculating it as if they worked out the interest on the last day of the year.

Thanks!

1 Like