Calculate Earnings on Savings Account
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Reviewed by Calculator Editorial Team
Use this calculator to estimate how much interest you'll earn on your savings account over time. Simply enter your initial deposit, annual interest rate, and the number of years you plan to save, then click "Calculate" to see your potential earnings.
How the Savings Calculator Works
The savings calculator estimates your potential earnings by applying the compound interest formula to your inputs. Compound interest means that interest is earned on both your initial deposit and the accumulated interest from previous periods.
Key Concepts
- Initial deposit: The amount of money you start with
- Annual interest rate: The percentage your money grows each year
- Compounding frequency: How often interest is calculated (annually in this calculator)
- Time period: The number of years you'll save
This calculator assumes annual compounding, which is common for savings accounts. The calculation doesn't account for inflation, taxes, or changes in interest rates over time.
Formula Used
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 = the annual interest rate (decimal)
- n = the number of times that interest is compounded per year
- t = the time the money is invested or borrowed for, in years
For this calculator, we use n = 1 (annual compounding) and calculate the interest earned as A - P.
Worked Example
Let's say you deposit $1,000 in a savings account with a 3% annual interest rate. Here's how your balance would grow over 5 years:
| Year | Starting Balance | Interest Earned | Ending Balance |
|---|---|---|---|
| 0 | $1,000.00 | $0.00 | $1,000.00 |
| 1 | $1,000.00 | $30.00 | $1,030.00 |
| 2 | $1,030.00 | $30.90 | $1,060.90 |
| 3 | $1,060.90 | $31.83 | $1,092.73 |
| 4 | $1,092.73 | $32.78 | $1,125.51 |
| 5 | $1,125.51 | $33.76 | $1,159.27 |
After 5 years, you would have earned $159.27 in interest, bringing your total balance to $1,159.27.
Understanding Compounding
Compounding is what makes savings grow faster over time. With annual compounding, each year's interest is added to your balance and earns interest in the following years. This creates exponential growth rather than linear growth.
Compounding vs. Simple Interest
With simple interest, you only earn interest on your original principal. With compound interest, you earn interest on both your principal and the accumulated interest.
The more frequently interest is compounded, the faster your money grows. However, savings accounts typically offer annual compounding, which is why this calculator uses that frequency.
Frequently Asked Questions
How accurate is this savings calculator?
This calculator provides an estimate based on the inputs you provide. Actual earnings may vary due to factors like changes in interest rates, fees, or additional deposits.
Does this calculator account for taxes on interest?
No, this calculator doesn't account for taxes on interest income. You may need to consult a tax professional to understand how interest income will be taxed in your jurisdiction.
Can I use this calculator for retirement accounts?
This calculator is designed for general savings accounts. Retirement accounts like 401(k)s or IRAs may have different rules regarding contributions, withdrawals, and tax treatment.
How often is the interest compounded in this calculator?
This calculator assumes annual compounding, which is common for savings accounts. Some accounts may offer more frequent compounding, which would result in slightly higher earnings.