Interest Calculator on Savings Account
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Reviewed by Calculator Editorial Team
Calculate how much interest you'll earn on your savings account with our free interest calculator. Whether you're saving for a short-term goal or planning for retirement, understanding how interest compounds over time can help you make the most of your money.
How Savings Interest Works
Savings accounts typically offer interest that compounds, meaning the interest you earn is added to your principal balance and earns additional interest in the next period. This process continues until you withdraw the money.
Key Terms:
- Principal (P): The initial amount of money you deposit into your savings account.
- Interest Rate (r): The annual percentage yield (APY) your bank offers on your savings balance.
- Time (t): The number of years your money will remain in the account.
- Compounding Frequency (n): How often interest is calculated and added to your balance (annually, monthly, etc.).
Most savings accounts compound interest monthly, which means your balance grows more quickly than if interest were paid annually. The more frequently interest is compounded, the faster your money grows.
How to Use This Calculator
Our interest calculator makes it easy to estimate how much you'll earn on your savings. Simply enter the following information:
- Your initial deposit amount (principal)
- The annual interest rate (APY) offered by your bank
- The number of years you plan to keep the money in the account
- The compounding frequency (usually monthly)
Click "Calculate" to see your projected balance and the total interest earned. The calculator will also display a chart showing your balance growth over time.
The Formula Explained
The future value of your savings with compound interest is calculated using the following formula:
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
The total interest earned is simply the future value minus the principal amount.
Worked Examples
Let's look at two examples to illustrate how compound interest works on savings accounts.
Example 1: Monthly Compounding
Suppose you deposit $1,000 into a savings account with a 2% annual interest rate that compounds monthly. How much will you have after 5 years?
| Year | Balance | Interest Earned |
|---|---|---|
| 0 | $1,000.00 | $0.00 |
| 1 | $1,020.18 | $20.18 |
| 2 | $1,040.75 | $20.57 |
| 3 | $1,061.72 | $20.97 |
| 4 | $1,083.09 | $21.37 |
| 5 | $1,104.87 | $21.78 |
After 5 years, you'll have $1,104.87, earning a total of $104.87 in interest.
Example 2: Annual Compounding
Now let's compare this to an account that compounds interest annually with the same principal and interest rate.
| Year | Balance | Interest Earned |
|---|---|---|
| 0 | $1,000.00 | $0.00 |
| 1 | $1,020.00 | $20.00 |
| 2 | $1,040.40 | $20.40 |
| 3 | $1,061.21 | $20.81 |
| 4 | $1,082.43 | $21.22 |
| 5 | $1,104.07 | $21.64 |
Notice that the account with monthly compounding has a higher balance ($1,104.87 vs $1,104.07) and earns slightly more interest ($104.87 vs $104.07). This demonstrates the power of compound interest when it's calculated more frequently.
Frequently Asked Questions
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the simple annual interest rate, while APY (Annual Percentage Yield) takes into account compounding interest. APY is always higher than APR for accounts that compound interest.
How often should I check my savings account balance?
It's a good idea to check your balance at least once a month to monitor your interest earnings and ensure there are no unauthorized transactions. Some banks also offer mobile apps that provide real-time balance updates.
Can I withdraw money from my savings account without penalty?
Most savings accounts allow unlimited withdrawals without penalty, but some may have a limited number of free withdrawals per month. Always check your account terms to understand any withdrawal limits or fees.
Is my savings account FDIC-insured?
Yes, all savings accounts in the US are protected by the FDIC up to $250,000 per depositor, per institution, for each account ownership category. This means your money is safe from bank failure.