Drip feed savings hack: Is it worth it?

Regular savers & lump sum combos vs fixed rates.

Regular savers are great for new savings you’re adding to each month, especially as you can now get up to 7% via them. But what do you do about existing savings?

This article will take you through a trick to boost your return on easy access savings using regular savings, and look at how the method compares to sticking your money in a longer-term fix.

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How the savings drip feed method works

It’s a very simple hack. If you’ve got a lump sum of savings you’ll be limited in how much you can put into the high-paying regular savers. But the rates you’ll get in accounts without those restrictions will be far lower.

But it’s not an either/or decision. You can have both and boost your overall return as a result.

To start you’d put your initial savings into the best easy access you can find. Then month by month you’d move as much as you can into a regular saver, or even multiple regular savers. This is the drip feed method.

So you’ll still earn the best rate you can on your money by using the regular savers, but not lose out on additional interest while you’re waiting to deposit it.

With most regular savers your account will close after 12 months. When that happens you’ll get all your interest payments, which you can add to your easy-access account while you open up new regular savers and start again.

If regular savers are completely new to you, then I’d recommend you read my article explaining how regular savers work.

Drip feeding vs easy access

Here are a few examples of the difference drip feeding makes when compared to just leaving your money in an easy-access account.

Obviously rates can and do change regularly, so the following are illustrative. On that basis I’ve calculated the figures using one of the better paying easy access accounts at the time of writing (2.81% from Al Rayan).

You could put some money in higher-paying accounts with restrictions (limited access or limited balances) and earn more from those, but it’d be too complicated for the purposes of this article. You can check out the best paying rates across all types of accounts here.

Drip feed £3,600

Let’s start with a smaller amount of savings, say £3,600. If you put that in the best buy easy-access account right now you’ll earn £101.16 in interest after a year.

If you kept that cash in a 0% paying account instead but added £300 a month into the best regular saver (7% from First Direct), you’ll get £135 over the year. So that’s a better place for your money.

But use the drip feed method from the best buy easy access account and you’d still earn that £135 from First Direct, but get another £47 on top, totalling £192! That’s an average rate of around 5.33%.

Regular Saver	Interest rate	Max monthly deposit	Regular Saver interest	Additional Easy access interest via drip feed (2.81%)
First Direct	7%	£300.00	£135.00	£47.00

Drip feed £12,000

The more money you have upfront, the more regular savers you’ll need. Let’s assume you’ve got a larger lump sum of £12,000. Put that in the same 2.81% paying easy-access account right now and over a year you’ll earn £337 in interest.

Alternatively, if you saved the same cash across the top four regular saver accounts, split into a total payment of £1,000 each month, you’d get a total return of £370 at the end of the year. So the difference is smaller, but still worth considering.

But if you drip-feed it into those top four regular savers, you’ll earn a total of £525. That’s an extra £155 and offers the equivalent of 4.375% AER. This table breaks each account down for you.

Regular Saver	Interest rate	Max monthly deposit	Regular Saver interest	Additional Easy access interest via drip feed (2.81%)
First Direct	7%	£300.00	£135.00	£47.00
Club Lloyds	5.25%	£400.00	£135.00	£62.00
Natwest	5.12%	£150.00	£50.00	£23.00
RBS	5.12%	£150.00	£50.00	£23.00
		TOTAL INTEREST	£370.00	£155.00

Drip feed £24,000

You can take it even further – though there’s a bit more admin involved. This example shows you how much you’d get with £24,000 saved up and put in an easy access account, then drip feed to eight high-paying regular savers.

Regular Saver	Interest rate	Max monthly deposit	Regular Saver interest	Additional Easy access interest via drip feed (2.81%)
First Direct	7%	£300.00	£135.00	£47.00
Club Lloyds	5.25%	£400.00	£135.00	£62.00
Natwest	5.12%	£150.00	£50.00	£23.00
RBS	5.12%	£150.00	£50.00	£23.00
HSBC	5%	£250.00	£81.00	£39.00
Halifax	4.50%	£250.00	£73.00	£39.00
Lloyds	4.50%	£250.00	£73.00	£39.00
BoS	4.50%	£250.00	£73.00	£39.00
		TOTAL INTEREST	£670.00	£311.00

This would give you a total of £981 interest, which is the equivalent of 4.09% over the year. You’ll end up with £307 more than just leaving it in an easy-access account.

Drip feeding vs fixed rates

Before you get too excited about the extra money you can make from drip-feeding into regular savers, it’s worth having a look at what you’d get if you just stuck the lump sum in a fixed-rate account.

This table assumes you’re happy to lock the money away for one year at a rate of 4.32% (the best option at the time of writing).

Lump sum	Total drip feed interest	Total one-year fixed interest	Difference
£3,600	£192	£156	£36
£12,000	£525	£518	£7
£24,000	£981	£1037	-£56

As you can see the margins are pretty small. And at a certain point you’ll actually earn less by drip feeding from easy access to regular savers. Even when there is a profit, the difference is marginal.

But that’s not the end of the story. Recently, one-year fixed rates have been falling while regular saver and easy-access account rates have been rising. If this continues the gap could well increase and become more appealing.

The importance of access

Whether you go for drip-feeding money or just whacking it into a fixed rate, you need to think about if you’ll need access to the cash at any point.

Fixes will completely lock the money away so you can’t get to it without a penalty (probably the loss of all the interest). But drip-feeding isn’t risk free either. Most, though not all, regular savers, will also lock your money away for a year.

So if you will need to access the bulk of the cash during the year then it makes sense to just keep it in fully easy access accounts.

But the drip feed method does offer you some flexibility over the fixed accounts. You’ll have access to the money while it’s in the easy access account, and you can also reduce how much you pay into regular savers month by month. So if plans change you can adapt accordingly.

Drip feed admin

There are few things to be aware of before you start.

First up, the best regular savers all require current accounts with those banks, and you’re usually limited to just one of the regular savers per person.

That’s not a problem as you can open up new accounts for those you don’t already bank with. However, each new application will be subject to a credit check, which will appear on your credit file. And it can be prudent to space out applications over a few months. So if you are planning on opening multiple current accounts to get access to multiple regular savers, this could take a while.

There’s also the ongoing movement of money to consider. This should be easy enough to automate, simply using standing orders to move the money from your easy-access account over to the regular savers.

Just make sure you aren’t required to have the standing order come out of your current acount. If so, you can still set it up to happen, it’s just an extra step.

Is drip-feeding worth it?