Online Savings Account Interest Calculator
'/%3E%3Ccircle cx='48' cy='39' r='19' fill='%23f2c9a5'/%3E%3Cpath d='M27 35c3-16 39-17 42 2-8-8-27-9-42-2z' fill='%23374151'/%3E%3Cpath d='M21 86c5-24 49-28 56 0z' fill='%232563eb'/%3E%3Ccircle cx='41' cy='41' r='2' fill='%23111827'/%3E%3Ccircle cx='55' cy='41' r='2' fill='%23111827'/%3E%3Cpath d='M42 52c4 3 9 3 13 0' stroke='%2392400e' stroke-width='3' fill='none' stroke-linecap='round'/%3E%3C/svg%3E)
Reviewed by Calculator Editorial Team
Calculate your potential savings account earnings with our online interest calculator. Whether you're comparing different accounts or planning your finances, this tool helps you understand how much interest you can earn on your deposits.
How to Use This Calculator
Using our online savings account interest calculator is simple:
- Enter your principal amount (the initial deposit)
- Select your interest rate (APR or APY)
- Choose the term length (in months or years)
- Select the compounding frequency (if applicable)
- Click "Calculate" to see your potential earnings
The calculator will display your total interest earned and the final amount in your account after the specified term.
How Savings Interest Works
Savings accounts typically offer interest on deposits, which is essentially "free money" your bank pays you for keeping your money there. The interest is calculated based on the principal amount and the interest rate offered by the bank.
There are two main types of interest rates you'll encounter:
- Annual Percentage Rate (APR) - The simple annual interest rate
- Annual Percentage Yield (APY) - The effective annual interest rate that takes compounding into account
Most online savings accounts offer APY, which is generally higher than APR because it accounts for compounding interest.
APR vs APY: What's the Difference?
The key difference between APR and APY is how they calculate interest:
- APR is the simple annual interest rate, calculated on the original principal only
- APY is the effective annual interest rate, calculated on the principal plus any accumulated interest
For example, if you have a savings account with a 1% APR and the bank compounds interest monthly, your effective APY would be slightly higher than 1% because you earn interest on interest.
APY Formula:
APY = (1 + (APR/n))n - 1
Where n is the number of compounding periods per year
Understanding Compound Interest
Compound interest is when interest is calculated on the initial principal and also on the accumulated interest of previous periods. This means your money grows exponentially over time.
The more frequently interest is compounded, the more you'll earn over time. Common compounding frequencies include:
- Annually (1 time per year)
- Semi-annually (2 times per year)
- Quarterly (4 times per year)
- Monthly (12 times per year)
- Daily (365 times per year)
For example, if you deposit $1,000 at 5% APY compounded monthly, you'll earn more than if the interest were compounded annually.
Example Calculation
Let's say you deposit $1,000 in a savings account with a 2% APY compounded monthly for 1 year:
- Principal (P) = $1,000
- APY = 2% or 0.02
- Compounding periods per year (n) = 12
- Time (t) = 1 year
Using the compound interest formula:
Compound Interest Formula:
A = P(1 + r/n)nt
Where A = final amount, P = principal, r = annual interest rate, n = number of times interest is compounded per year, t = time in years
Plugging in the numbers:
A = $1,000(1 + 0.02/12)12×1 ≈ $1,020.18
This means you would earn approximately $20.18 in interest over the year.
Frequently Asked Questions
What is the difference between APR and APY?
APR is the simple annual interest rate, while APY is the effective annual interest rate that takes compounding into account. APY is generally higher than APR because it accounts for the interest earned on interest.
How often is interest compounded in savings accounts?
Most online savings accounts compound interest daily, which means you earn interest on your balance every day. Some accounts may compound monthly or annually, but daily compounding is most common.
Can I withdraw money from a savings account without penalty?
This depends on the specific savings account terms. Some accounts allow unlimited withdrawals without penalty, while others may have restrictions or fees for frequent withdrawals. Always check the terms and conditions of your account.
Is it better to have a high APR or high APY?
APY is generally better because it accounts for compounding interest, which means you earn more over time. However, APR is still important to understand as it represents the simple annual interest rate.