5 Interest Rate Savings Account Calculator
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Reviewed by Calculator Editorial Team
Use this calculator to determine how much your savings will grow with a 5% annual interest rate. Simply enter your initial deposit and the time period, then see how compound interest builds your money over time.
How to Use This Calculator
To calculate your savings growth with a 5% interest rate:
- Enter your initial deposit amount in the "Initial Deposit" field.
- Select the time period (in years) you want to calculate for.
- Click "Calculate" to see your projected balance.
- Review the results and chart showing your savings growth over time.
The calculator uses the compound interest formula to show how your money grows with interest earned on both the initial deposit and accumulated interest.
How Compound Interest Works
Compound interest means your money earns interest not just on the original amount, but also on any accumulated interest. With a 5% annual interest rate, your savings grow faster than with simple interest.
Compound Interest Formula
A = P(1 + r/n)^(nt)
Where:
- A = the future value of the investment/loan, including interest
- P = the principal investment amount (the initial deposit or loan amount)
- r = annual interest rate (decimal)
- n = number of times interest is compounded per year
- t = time the money is invested or borrowed for, in years
For this calculator, we assume interest is compounded annually (n = 1).
Key Assumptions
- The interest rate remains constant throughout the period
- No additional deposits or withdrawals are made
- Interest is compounded annually
Worked Example
Let's say you deposit $1,000 in a savings account with a 5% annual interest rate. Here's how your balance grows over 5 years:
| Year | Starting Balance | Interest Earned | Ending Balance |
|---|---|---|---|
| 0 | $1,000.00 | $0.00 | $1,000.00 |
| 1 | $1,000.00 | $50.00 | $1,050.00 |
| 2 | $1,050.00 | $52.50 | $1,102.50 |
| 3 | $1,102.50 | $55.13 | $1,157.63 |
| 4 | $1,157.63 | $57.88 | $1,215.51 |
| 5 | $1,215.51 | $60.78 | $1,276.29 |
After 5 years, your $1,000 initial deposit grows to $1,276.29 with compound interest at 5%.
Frequently Asked Questions
How is compound interest different from simple interest?
With simple interest, you only earn interest on the original principal amount. With compound interest, you earn interest on both the original principal and any accumulated interest, leading to faster growth over time.
Does this calculator account for inflation?
No, this calculator shows the nominal growth of your savings without adjusting for inflation. For real growth, you would need to compare the final amount to the purchasing power of your initial deposit.
Can I use this calculator for other interest rates?
This calculator is specifically designed for a 5% interest rate. For other rates, you would need to adjust the formula or use a more general savings calculator.
How often is the interest compounded?
This calculator assumes annual compounding, which is common for many savings accounts. Some accounts may compound more frequently (monthly, daily), which would result in slightly different growth.