Savings Calculator

How Savings Interest Works

Savings accounts, CDs, and money market accounts earn interest on your deposited funds. The Annual Percentage Yield (APY) accounts for compound interest and shows your true earnings rate, making it the best number to compare across different savings products.

Interest Calculation Formulas

• Simple Interest: I = P x r x t (Principal x annual rate x time in years)
• Compound Interest (lump sum): A = P(1 + r/n)^(nt), where n = compounding frequency per year
• Compound Interest (monthly deposits): A = PMT x [(1 + r/n)^(nt) - 1] / (r/n)
• APY from APR: APY = (1 + APR/n)^n - 1

$10,000 Lump Sum at 4.5% APY Over Time

• 6 months: $10,223 (earned $223)
• 1 year: $10,450 (earned $450)
• 2 years: $10,920 (earned $920)
• 5 years: $12,462 (earned $2,462)
• 10 years: $15,530 (earned $5,530)

$500/Month Deposits at 4.5% APY Over Time

• 1 year (deposited $6,000): $6,148
• 2 years (deposited $12,000): $12,568
• 5 years (deposited $30,000): $33,476
• 10 years (deposited $60,000): $74,940

Savings Account Types Comparison

• High-Yield Savings: 4.0-5.0% APY, FDIC insured, fully liquid, best for emergency funds
• Certificate of Deposit (CD): 4.0-5.25% APY, fixed term (3 months to 5 years), early withdrawal penalty
• Money Market Account: 3.5-5.0% APY, check-writing privileges, may require higher minimum balance
• Traditional Savings: 0.01-0.5% APY, convenient but very low returns
• Treasury I-Bonds: Variable rate tied to inflation, $10,000 annual purchase limit, must hold 1+ year

Savings Tips

• Keep 3-6 months of living expenses in a high-yield savings account as an emergency fund.
• Use a CD ladder (split deposits across CDs with staggered maturity dates) for higher rates with periodic access.
• Automate deposits to your savings account on payday to build consistency.
• Compare APY rates regularly -- online banks typically offer 10-20x higher rates than traditional banks.
• Remember FDIC insurance covers up to $250,000 per depositor per institution.

Important Notes

Interest earned on savings accounts is taxable as ordinary income at the federal level (and in most states). Your bank will issue a 1099-INT for interest over $10/year. Savings rates are variable and change with Federal Reserve policy. This calculator assumes a fixed rate for the entire term; actual earnings may vary as rates adjust.