5 APR Savings Account Calculator

A 5% APR savings account is a great way to grow your money while keeping it accessible. This calculator helps you estimate how much interest you'll earn over time with a 5% annual percentage rate (APR).

How a 5% APR Savings Account Works

A 5% APR savings account means you earn 5% of your deposited amount as interest each year. This is typically calculated on a daily basis and credited to your account monthly or quarterly, depending on the bank's policy.

Key Terms

APR (Annual Percentage Rate): The annual interest rate on your savings.
APY (Annual Percentage Yield): The effective annual rate of return, accounting for compounding.
Compounding Frequency: How often interest is calculated and added to your balance (monthly, quarterly, annually).

Simple Interest Formula: Interest = Principal × Rate × Time Final Balance = Principal + Interest

Note: Some banks may offer a slightly higher APY than APR due to compounding. Our calculator shows both values for comparison.

How Interest is Calculated

The interest calculation depends on the compounding frequency. For monthly compounding:

A = P × (1 + r/n)^(nt) Where: A = Amount of money accumulated after n years, including interest. P = Principal amount (the initial amount of money) r = Annual interest rate (decimal) n = Number of times interest is compounded per year t = Time the money is invested for, in years

For example, with $1,000 at 5% APR compounded monthly for 1 year:

Month	Interest Earned	Balance
1	$4.17	$1,004.17
2	$4.17	$1,008.51
3	$4.17	$1,012.99
4	$4.17	$1,017.62
5	$4.17	$1,022.40

Worked Examples

Example 1: $1,000 for 1 Year

With $1,000 at 5% APR compounded monthly for 1 year:

Monthly interest rate: 5% ÷ 12 = 0.4167%
Interest for first month: $1,000 × 0.004167 = $4.17
End of year balance: $1,000 × (1 + 0.004167)^12 ≈ $1,051.16
Total interest earned: $51.16

Example 2: $5,000 for 5 Years

With $5,000 at 5% APR compounded monthly for 5 years:

End of year 1: $5,000 × (1 + 0.004167)^60 ≈ $5,265.37
End of year 5: $5,265.37 × (1 + 0.004167)^60 ≈ $5,545.49
Total interest earned: $545.49

Remember: These are estimates. Actual results may vary based on your bank's specific compounding method and any fees.

FAQ

What is the difference between APR and APY?: APR is the annual interest rate, while APY accounts for compounding and shows the effective annual rate. For a 5% APR with monthly compounding, the APY is approximately 5.12%.
How often is interest calculated and credited?: Most banks calculate interest daily but credit it monthly or quarterly. Our calculator assumes monthly compounding by default.
Are there any fees associated with a 5% APR savings account?: Some banks may charge maintenance fees or require minimum balances. Check your bank's terms and conditions.
Can I withdraw money from a savings account without penalty?: Yes, savings accounts are designed for easy access. However, some banks may limit withdrawals to a certain number per month.
Is my money FDIC-insured?: Yes, deposits in U.S. banks are protected up to $250,000 per depositor per institution.