Calculate Interest Earned Savings Account

Calculate how much interest you'll earn on your savings account with our free online calculator. Simply enter your principal amount, annual interest rate, and time period to see your potential earnings.

How to Use This Calculator

Using our savings interest calculator is simple:

Enter the principal amount (the initial deposit or balance in your savings account)
Input the annual interest rate (APR) offered by your bank
Select the time period for which you want to calculate interest
Choose whether you want simple or compound interest
Click "Calculate" to see your results

The calculator will display your total interest earned and your final balance after the specified time period.

Formula Explained

There are two main types of interest calculations for savings accounts:

Simple Interest

The formula for simple interest is:

Interest = Principal × Rate × Time Final Balance = Principal + Interest

Where:

Principal = Initial amount of money
Rate = Annual interest rate (in decimal form)
Time = Time the money is invested (in years)

Compound Interest

The formula for compound interest is:

Final Balance = Principal × (1 + Rate/Compounding Periods)^(Compounding Periods × Time) Interest = Final Balance - Principal

Where:

Principal = Initial amount of money
Rate = Annual interest rate (in decimal form)
Compounding Periods = Number of times interest is compounded per year (e.g., 4 for quarterly)
Time = Time the money is invested (in years)

Most savings accounts offer compound interest, which means your interest is calculated on both your initial deposit and the accumulated interest from previous periods.

Worked Example

Let's calculate the interest earned on a $1,000 savings account with a 2% annual interest rate over 3 years, compounded quarterly.

Given:

Principal (P) = $1,000
Annual Interest Rate (r) = 2% or 0.02
Time (t) = 3 years
Compounding Periods per Year (n) = 4 (quarterly)

Calculation:

Final Balance = 1000 × (1 + 0.02/4)^(4 × 3) Final Balance = 1000 × (1.005)^12 Final Balance ≈ 1000 × 1.061678 Final Balance ≈ $1,061.68 Interest Earned = Final Balance - Principal Interest Earned ≈ $1,061.68 - $1,000 = $61.68

After 3 years, you would earn approximately $61.68 in interest on your $1,000 savings account with a 2% annual interest rate compounded quarterly.

FAQ

What is the difference between simple and compound interest?

Simple interest is calculated only on the original principal amount, while compound interest is calculated on the initial principal and also on the accumulated interest of previous periods. Compound interest typically results in higher earnings over time.

How often is interest compounded in savings accounts?

Most savings accounts compound interest daily, monthly, quarterly, or annually. The more frequently interest is compounded, the higher your earnings will be over time.

Can I withdraw money from a savings account without penalty?

This depends on the specific terms of your savings account. Some accounts allow unlimited withdrawals, while others may have restrictions or penalties for early withdrawals.

How does inflation affect my savings interest?

Inflation can erode the purchasing power of your savings interest. If the interest rate you earn is lower than the inflation rate, your money will lose value over time.