Compound Interest-where to find it.

[chiangrai]

I am Reading a Dave Ramsey book about personal finance

where he advises you to save money where you can get

compound interest.

He doesn't explain exactly where you can get this compound

interest.He uses some acronyms that only an American would understand,

one of them being IRA which is  highly misleading if you come from where I come from.

However,does anyone know where I can get this kind of interest either here  or

back in Europe.

 

 

[Peterw42]

Any bank etc will give compound interest if the interest earned on the principle is put back into the same account, Compound interest is interest on interest. Deposit $100 at 10%pa and earn $10 interest, put the $10 in the same account as the $100, next year you earn 10% interest on $110. the next year its 10% of $121.

[simoh1490]

The secret is the frequency of the compound, daily, weekly, monthly or yearly - there's no daily compounding to be had in Thailand I'm afraid, monthly is the best you'll see.

[chiangrai]

By any bank does that include my bank in Europe,Bangkok bank and Krung Thai Bank.

 

What are these accounts called.What do I ask for at the counter or look for in online banking.

 

 

[simoh1490]

9 minutes ago, chiangrai said:

By any bank does that include my bank in Europe,Bangkok bank and Krung Thai Bank.

 

What are these accounts called.What do I ask for at the counter or look for in online banking.

 

 

You will have to look at the details of each bank's savings accounts to understand what they offer, the compounding frequency can vary from savings product to savings product, or just ask the question, what is compounding frequency. In Thailand monthly or greater compounding is the norm, in the UK daily compounding is not uncommon (or it used to be so).

[simoh1490]

A savings account that adds interest annually, into your savings account, is compounding annually.

 

A savings product that adds interest to your savings monthly is compounding monthly.

 

A savings account that pays your interest into another account, isn't compounding at all.

[chiangrai]

That means that the savings accounts that I already have

in Thailand and Europe already do compound interest I just need to find out what the frequency  of compounding is.

Do some banks have different frequency's for different savings accounts

What about the interest rate doesn't that differ.

 

[simoh1490]

1 minute ago, chiangrai said:

That means that the savings accounts that I already have

in Thailand and Europe already do compound interest I just need to find out what the frequency  of compounding is.

Do some banks have different frequency's for different savings accounts

What about the interest rate doesn't that differ.

 

 

All banks have different savings products, potentially, all products may compound on a different basis, there are no rules governing the frequency of compound interest at banks.

 

Yes, the interest rate does matter, you need to look at the interest rate and the compounding frequency to see which is account offers the best deal, for example:

 

Here's a link to a compounding calculator for you to experiment with: 

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

[lkn]

3 hours ago, simoh1490 said:

The secret is the frequency of the compound, daily, weekly, monthly or yearly - there's no daily compounding to be had in Thailand I'm afraid, monthly is the best you'll see.

Doesn’t actually matter that much.

 

Say you deposit 1,000,000 on your savings account and they give you either 1.3% yearly or 1.3/12% monthly.

 

After 10 years you’ll either have 1,137,875 or 1,138,748. So a difference of only 873 baht. Even with weekly interests, the advantage over yearly is still less than a thousand baht.

 

Edited January 12, 2018 by lkn

[chiangrai]

What is an average interest rate in Thailand or Europe.

[simoh1490]

2 hours ago, chiangrai said:

What is an average interest rate in Thailand or Europe.

Interest rates are set by a country's Central Bank, in the UK that's the Bank of England, in Thailand that's the Bank of Thailand. Banks in those countries then set their rates based on the central bank rate. So if a central bank rate is 1.50% (Thailand currently), banks will pay customers as much as 1.70% per year interest on their savings or for immediate access, as low as 0.25%, 1.70% is the competitive rate in order to get customers in the door. There's no such thing really as an average rate, I suggest you use the central bank rate.

[lkn]

8 hours ago, chiangrai said:

What is an average interest rate in Thailand or Europe.

For Thailand the interest rate on a savings account is currently around 0.5%.

 

There is really no reason to concern yourself with bank interest rates (at this time). If you are getting interests that are worth speaking about then you probably have too much money in the bank (that could have been invested in other securities).

[Oxx]

14 hours ago, simoh1490 said:

A savings account that adds interest annually, into your savings account, is compounding annually.

 

A savings product that adds interest to your savings monthly is compounding monthly.

 

This, I'm afraid, is utter tosh.

 

The interest is compounded daily.  The accrued interest is credited to your account monthly/yearly.

 

For example, for Krungi Sri deposit accounts

 

Quote

"The Bank shall calculate interests on a daily basis based on the remaining balance and the interests shall be paid semiannually on the banking day before the last banking day of June and December (after withholding tax) except for those having special agreement with the Bank."

 

https://www.krungsri.com/bank/getmedia/bc16535f-ca8c-4d3e-a0eb-ad581bb8713f/Deposit-Rates-25102017.aspx  Page 10

 

 

[Oxx]

15 hours ago, chiangrai said:

he advises you to save money where you can get

compound interest.

He doesn't explain exactly where you can get this compound

interest.

 

All this means is don't keep a lot of money in a current or chequing account which doesn't pay any interest.  (These days most don't.)  Rather, put most of it in a savings account that pays interest.

[Peterw42]

In most cases you will get a better return buying shares in the bank, rather than depositing funds in the bank. Find one that does share reinvestment (more shares instead of dividends)and you are doing the same as compound interest.

 

There are banks in Australia that give 2% on savings and a solid 6% (franked) on their shares.

Edited January 13, 2018 by Peterw42

[simoh1490]

39 minutes ago, Oxx said:

 

This, I'm afraid, is utter tosh.

 

The interest is compounded daily.  The accrued interest is credited to your account monthly/yearly.

 

For example, for Krungi Sri deposit accounts

 

 

I'm afraid my deposits at UOB don't work that way, the interest is paid away to a separate account monthly, I expect other banks do similar.

[Oxx]

58 minutes ago, simoh1490 said:

I'm afraid my deposits at UOB don't work that way, the interest is paid away to a separate account monthly, I expect other banks do similar.

 

The interest in the deposit account is still compounded daily, for each day of the month.  It's then paid away and the compounding starts all over again.

[Suradit69]

20 hours ago, simoh1490 said:

The secret is the frequency of the compound, daily, weekly, monthly or yearly - there's no daily compounding to be had in Thailand I'm afraid, monthly is the best you'll see.

... and the rate used. Assuming the money remains in the account, a monthly payout may be offered by the bank that costs them no more in total, and possibly less, than they would dish out on the same balance in a quarterly or semi-annual account.

 

I hold several Closed End Funds, some of which make distributions quarterly and others monthly. I prefer the latter because it helps smooth out cash flow of income that I use for expenses, but obviously the more frequent payout creates a higher expense to the fund that ultimately means there's less money available for distributions.

 

And of course, as Einstein said, compound interest on debt will kill you.

 

Edited January 13, 2018 by Suradit69

[12DrinkMore]

19 hours ago, lkn said:

Say you deposit 1,000,000 on your savings account and they give you either 1.3% yearly or 1.3/12% monthly.

 

Generally they will always quote the annualised rate, if they are paying interest monthly, then you will get slightly less than the 1.3/12 so that at the end of the year it comes to exactly 1.3%.

 

 

[Pib]

22 hours ago, simoh1490 said:

A savings account that adds interest annually, into your savings account, is compounding annually.

 

A savings product that adds interest to your savings monthly is compounding monthly.

 

A savings account that pays your interest into another account, isn't compounding at all.

Oh, it can get more complicated than above.   Some banks compound daily but pay monthly....and then express the interest rate as an annual rate.  A person must look closely at each bank account as to how they calculate "and" pay interest.

 

And example of a interest calculated daily but paid monthly savings account in Thailand is the Krungsri Mee Tae Dai saving account which quite a few ThaiVisa members have...to include me.

 

https://www.krungsri.com/bank/en/PersonalBanking/DepositProducts/SavingsDeposit/MeeTaeDaiSavings.html

 

Quote

Mee Tae Dai Savings.

General information

• Earn higher interest rate
• Your interest will be calculated daily
• Receive interest every month

 

•  

[12DrinkMore]

7 hours ago, Peterw42 said:

There are banks in Australia that give 2% on savings and a solid 6% (franked) on their shares.

 

Please give me a pointer.

 

Although last time I tried to buy stocks in Australia they were insisting that I went for a personal meeting to explain the risks. Part of the Aussie Nanny State regulations, apparently. 

 

The franked rate I believe is only achievable if one is tax resident in Aussieland. Otherwise you cannot claimback the withholding tax?

[12DrinkMore]

Best deal I can find at the moment is the TMB Nofix.

 

They'll pay 1.3% plus 0.3% bonus if you meet the conditions.

 

Also no tax deduction and instant withdrawal.

 

https://www.tmbbank.com/en/accounts/savings/tmb-no-fixed-account.html

 

(they are not so good with the English website).

[Pib]

41 minutes ago, 12DrinkMore said:

Best deal I can find at the moment is the TMB Nofix.

 

They'll pay 1.3% plus 0.3% bonus if you meet the conditions.

 

Also no tax deduction and instant withdrawal.

 

https://www.tmbbank.com/en/accounts/savings/tmb-no-fixed-account.html

 

(they are not so good with the English website).

Although it may not be stated on their webpage, when you exceeded Bt20K interest earned per year a 15% tax withholding on interest earned kicks in.  That even occurs on a regular Thai savings accounts which only earn around 0.5%...and the 15% withholding applies to any amount of interest earned on a fixed savings account.  Yeap, going over 20K interest earned per year triggers a tax withholding.

Edited January 13, 2018 by Pib

[Peterw42]

3 hours ago, 12DrinkMore said:

 

Please give me a pointer.

 

Although last time I tried to buy stocks in Australia they were insisting that I went for a personal meeting to explain the risks. Part of the Aussie Nanny State regulations, apparently. 

 

The franked rate I believe is only achievable if one is tax resident in Aussieland. Otherwise you cannot claimback the withholding tax?

NAB in Australia. 

Kiatnakin Bank in Thailand paid a 7% yield last year..

[Oxx]

21 minutes ago, Peterw42 said:

Kiatnakin Bank in Thailand paid a 7% yield last year..

 

(1) You mean "dividend" not "yield".  I'm pretty sure none of their deposit products yielded 7%.  That's just ridiculous.  Your figures is apparently the dividend paid last year -  7.16% according to Bloomberg.

 

(2) The topic is about "interest" not "dividend", so your posting is massively off topic.

 

 

[scubascuba3]

•  

What makes you think "your interest will be calculated daily" means its compounded?

 

[Peterw42]

10 minutes ago, Oxx said:

 

(1) You mean "dividend" not "yield".  I'm pretty sure none of their deposit products yielded 7%.  That's just ridiculous.  Your figures is apparently the dividend paid last year -  7.16% according to Bloomberg.

 

(2) The topic is about "interest" not "dividend", so your posting is massively off topic.

 

 

1) Yes I meant dividend, the dividend paid (as a percentage of the share price) is often referred to as the dividend "yield".

 

2) I was answering a direct question from post 21. Not really off topic if someone asks a question.

[Pib]

13 hours ago, scubascuba3 said:

What makes you think "your interest will be calculated daily" means its compounded?

 

 

Mee Tae Dai Savings.

General information

• Earn higher interest rate
• Your interest will be calculated daily
• Receive interest every month

 

Why else calculate it daily unless its being compounded daily but only being paid monthly.  

 

 

 

[scubascuba3]

 

Mee Tae Dai Savings.

General information

• Earn higher interest rate
• Your interest will be calculated daily
• Receive interest every month

 
Why else calculate it daily unless its being compounded daily but only being paid monthly.  
 
 
 

I don't think so, it gets calculated based on the daily balance which may be changing, that's why they say it. It gets compounded when the interest is paid monthly in your example

[Pib]

Could be....from the Krungsri website...more details on how they calculate/pay the interest the an MTD account.