Interest, decoded
Lesson 6 of 12 in our free Saving & Emergency Funds guide: a 5-minute money game with the key points below.
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Questions you'll answer
£1,000 in an account paying 4% AER. How much interest after one year (before any tax)?
Which account pays more over a year on £1,000?
Quick facts
- Fact: “AER includes the effect of interest being added during the year.” — That's why it's the fair comparison number.
- Myth: “An introductory bonus rate lasts forever.” — Bonus rates often drop after a set period. Set a reminder to check.
- Fact: “If the Bank of England base rate changes, savings rates often follow.” — Variable savings rates tend to move with the base rate (currently 3.75%).