Calculate Savings Interest
Enter your initial deposit, monthly contribution, interest rate, and time period to see how your savings grow with compound interest. Results update automatically as you type.
| Year | Contributions | Interest Earned | Total Balance |
|---|
Understanding Compound Interest
Compound interest is the interest you earn on both your original savings and on the interest that has already been added to your account. Unlike simple interest (which is calculated only on the principal), compound interest creates a snowball effect that accelerates your savings growth over time.
The compound interest formula
A = P(1 + r/n)^(nt)
Where:
- A = Final amount (future value)
- P = Principal (initial deposit)
- r = Annual interest rate (as a decimal)
- n = Number of compounding periods per year
- t = Time in years
When you also make regular monthly contributions (PMT), the future value of those contributions is calculated separately and added to the principal's growth:
FV_contributions = PMT x [((1 + r/n)^(nt) - 1) / (r/n)]
APY vs APR -- What Is the Difference?
APR (Annual Percentage Rate)
APR is the stated annual interest rate without accounting for compounding. It is the base rate that banks advertise. If a bank offers 5% APR compounded monthly, they apply 5%/12 = 0.4167% each month.
APY (Annual Percentage Yield)
APY reflects the actual annual return after compounding is factored in. The formula is:
APY = (1 + r/n)^n - 1
A 5% APR compounded daily gives an APY of approximately 5.13%. The more frequently interest compounds, the higher the APY relative to the APR.
When comparing savings accounts, always compare APY values since they represent the actual return you will earn. Federal regulations require banks to disclose the APY on deposit accounts, making it the most reliable number for comparison.
How Compounding Frequency Affects Your Savings
The compounding frequency determines how often earned interest is added to your balance, so it can itself begin earning interest. Here is how different frequencies compare:
| Frequency | Periods/Year | $10,000 at 5% APR After 10 Years | Effective APY |
|---|---|---|---|
| Annually | 1 | $16,288.95 | 5.000% |
| Quarterly | 4 | $16,386.16 | 5.095% |
| Monthly | 12 | $16,470.09 | 5.116% |
| Daily | 365 | $16,486.65 | 5.127% |
The difference between daily and annual compounding on $10,000 at 5% over 10 years is about $198. While small for modest amounts, the gap widens significantly with larger balances, higher rates, and longer time horizons.
Tips to Maximize Your Savings Interest
- Shop for the best APY. High-yield savings accounts (often at online banks) frequently offer rates 10x or more compared to traditional banks.
- Set up automatic monthly deposits. Consistent contributions compound over time and build disciplined saving habits.
- Leave your money invested. Withdrawals reduce your balance and the future interest you earn on it. Let compounding work uninterrupted.
- Compare compounding frequency. If two accounts offer the same APR, the one that compounds more frequently will yield slightly more.
- Watch for promotional rates. Some accounts offer introductory rates that drop after a few months. Focus on the ongoing APY.
- Consider CDs for fixed terms. If you do not need the money for a set period, certificates of deposit may offer higher rates than savings accounts in exchange for locking funds.
Frequently Asked Questions
What is the difference between APY and APR?
APR (Annual Percentage Rate) is the stated interest rate without accounting for compounding. APY (Annual Percentage Yield) includes the effect of compounding and reflects the actual amount you earn in a year. APY is always equal to or higher than APR. For example, a 5% APR compounded daily yields an APY of approximately 5.13%.
How does compounding frequency affect my savings?
The more frequently interest compounds, the more you earn. Daily compounding earns slightly more than monthly, which earns more than quarterly, which earns more than annual compounding. The difference is more noticeable at higher interest rates and over longer time periods.
What is compound interest?
Compound interest means you earn interest on both your original deposit and on previously earned interest. This creates a snowball effect where your savings accelerate over time. The formula is A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the compounding frequency, and t is time in years.
How much interest will I earn on $10,000 in a savings account?
It depends on the interest rate and time period. At 4.5% APY, $10,000 earns approximately $450 in the first year. Over 5 years with no additional deposits, it grows to about $12,462. With $200 monthly deposits, it would reach approximately $25,907 after 5 years.
What is a good interest rate for a savings account?
High-yield savings accounts typically offer 4--5% APY, while traditional bank savings accounts often pay 0.01--0.5%. Online banks and credit unions tend to offer the most competitive rates. Rates fluctuate with the federal funds rate set by the Federal Reserve.
Does this calculator store my data?
No. All calculations run entirely in your browser. No data is sent to any server, and nothing is stored.
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Privacy & Limitations
Privacy: This calculator runs entirely in your browser. No financial data -- including deposit amounts, rates, or projections -- is transmitted or stored anywhere.
Limitations: This calculator assumes a constant interest rate and does not account for taxes on interest income, account fees, rate changes, or withdrawal penalties. Actual returns may differ from projections. This is not financial advice.
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Savings Interest Calculator FAQ
What is the difference between APY and APR?
APR (Annual Percentage Rate) is the stated interest rate without accounting for compounding. APY (Annual Percentage Yield) includes the effect of compounding and reflects the actual amount you earn in a year. APY is always equal to or higher than APR. For example, a 5% APR compounded daily yields an APY of approximately 5.13%.
How does compounding frequency affect my savings?
The more frequently interest compounds, the more you earn. Daily compounding earns slightly more than monthly, which earns more than quarterly, which earns more than annual compounding. The difference is more noticeable at higher interest rates and over longer time periods. For example, $10,000 at 5% for 10 years earns about $48 more with daily compounding than with annual compounding.
What is compound interest?
Compound interest means you earn interest on both your original deposit and on previously earned interest. This creates a snowball effect where your savings accelerate over time. The formula is A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding frequency, and t is time in years.
How much interest will I earn on $10,000 in a savings account?
It depends on the interest rate and time period. At 4.5% APY (a competitive high-yield savings rate), $10,000 earns approximately $450 in the first year. Over 5 years with no additional deposits, it grows to about $12,462. With $200 monthly deposits, it would reach approximately $25,907 after 5 years.
What is a good interest rate for a savings account?
High-yield savings accounts typically offer 4-5% APY (as of 2024-2025), while traditional bank savings accounts often pay 0.01-0.5%. Online banks and credit unions tend to offer higher rates. Rates fluctuate with the federal funds rate set by the Federal Reserve.
Does this calculator store my data?
No. All calculations run entirely in your browser. No data is sent to any server, and nothing is stored.