Reaching £100k in savings or investments is very achievable if you are smart with your finances. Once you reach that milestone you can really start to make some considerable interest on your money.
In this article we’ll take a look at exactly how much you could earn each month from interest on £100k as well as some different ways you can use that money to make an income.
How Much Interest Could You Earn On £100k
The amount of interest you get from a savings account is based on the current BoE base rate. For about the last decade, interest rates have been very low, so they haven’t given much return. But, with the recent rise in the Bank of England Base Rate, interest rates have gone up considerably.
Most high street banks and even online banks will accept £100k without a problem. Some accounts will have limits on the amount you can invest but it’s usually around £200-250k. Once you get above that you will have to find some higher limit accounts.
Sainsbury’s Bank via Hargreaves Lansdown is currently offering 5.18% AER fixed up to £10 Million.
Rates can change regularly, so we have put together a table below showing you how much interest you could earn on £100k at different rates.
| £100k Saved At | Weekly | Monthly | Yearly |
|---|---|---|---|
| 1% | £19.18 | £83.33 | £1000.00 |
| 2% | £38.36 | £166.67 | £2000.00 |
| 3% | £57.53 | £250.00 | £3000.00 |
| 4% | £76.71 | £333.33 | £4000.00 |
| 5% | £95.89 | £416.67 | £5000.00 |
| 6% | £115.07 | £500.00 | £6000.00 |
| 7% | £134.25 | £583.33 | £7000.00 |
At the current rate of 5.18% on the Sainsburys Savings account above you would earn £5,180 per year in interest. That’s a considerable amount! Let’s take a look at how that breaks down over the year.
How Much Interest On £100k Per Day
Having a 5% interest rate on £100k would earn you £13.70 per day in interest.
£5,000 per year / 365 Days Per Year = £13.70 Per Day
If your interest is paid monthly or quarterly and you left the money in the account your daily payout would grow due to compounding interest.
How Much Interest On £100k Per Week
Having a 5% rate on £100k would earn you £95.89 per week in interest.
£5,000 per year / 52.1429 Weeks Per Year = £95.89 Per Week
If your interest is paid monthly or quarterly and you left the money in the account your daily payout would grow due to compounding interest.
How Much Interest On £100k Per Month
Having a 5% rate on £100k would earn you £416.67 per month in interest.
£5,000 per year / 12 Months per year = £416.67 Per Month
If your interest is paid monthly or quarterly and you left the money in the account your daily payout would grow due to compounding interest.
Is The Interest Taxed?
Unfortunately, you will have to pay tax on your interest, especially with the amount you will earn from £100k. Basic rate taxpayers can earn up to £1,000 in interest tax-free and higher rate payers get £500 tax-free. Additional ratepayers don’t get a personal allowance.
After your Personal Savings Allowance, the remaining is taxed at your current income tax rate.
One way to avoid paying tax on savings interest is to save your money in a Cash ISA. ISAs are tax-free however there is a contribution limit of £20,000 per year. That’s not going to make a huge difference if you are trying to save £100k in one go.
Use our interest calculator to calculate interest on any amount.
Other Ways To Invest £100k To Earn Better Returns
If you have £100k, a savings account is not the only place for your money. Diversifying where you put your money is a wise decision to protect your wealth. With £100k you have a few different places you can invest your money. Let’s take a look at some of the most popular ways to invest your money in the UK.
Stock Market
The stock market is one of the most passive ways to invest your money. Personally, I invest most of my portfolio in Index Funds that have historically grown at over 10% for the past 50 years. This is a great way to get exposure to the whole market without having to pick your own individual stocks which can be much riskier.
Less than 10% of U.S. actively managed funds beat the market. If these people can’t beat the market, we probably can’t either. That’s why I opt to invest in the broad market through low-cost index funds.
Property
Property is another proven way to invest your money and grow your wealth over time. You can use your cash to put deposits on rental properties and rent to tenants providing a consistent flow of cash. Historically properties have gone up in value over long periods of time, so you get both the appreciation on your building as well as the cash flow.
However, unlike stocks property will require some work. You will have to deal with maintenance and handling tenants.
Buying Businesses
With £100k you have the option to buy or invest in your own business. Personally, I build online content sites just like this one. Investing in content on a blog can produce a much higher return than interest on a savings account but it also comes with much more risk.
Depending on your area of expertise, there may be a business that could invest in, run and grow your £100k faster than other options out there.
Is It Better To Save Or Invest Your Money?
There really is no right option here. It all comes down to personal circumstances.
Historically, over the long term (10+ Years) investing in a low-cost broad market index fund will outperform a savings account. If you don’t plan on needing the money any time soon investing may be a better option.
If you plan on needing your savings in the short term, for example, to purchase a house or pay for a wedding, keeping your money in a high-interest savings account is a better option.
Is My £100k Safe In A Bank?
The FSCS protects 100% of the first £85,000 you have saved per UK-regulated financial institution (Not account). This money is guaranteed to be protected. If you spread your money across multiple financial institutions you can have more protection.
Your bank must be registered with the Financial Conduct Authority to be covered. Ensure it is before depositing your money.
Why It’s Important To Earn Interest On £100k
If you are not earning interest on your savings then it is losing purchasing power due to inflation. At the time of writing this, inflation is at 7.3% in the UK. This eats away at your purchasing power year after year, meaning that your £100k won’t go as far as it used to.
It’s important to at least preserve your purchasing power by growing your money at the same or higher than the rate of inflation.
Final Thoughts
If you have managed to get your hands on £100k you’re already in a great position. By putting your money in a high-interest savings account you can make a considerable amount of money each year just through interest payments. While savings rates are good at the minute, they won’t always be. Investing your £100k in a balanced portfolio of assets could be a better option.
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