If you’re saving for a specific goal, like a down payment for a house or the price of a round-the-world vacation, use a savings calculator to calculate how much you need to set aside each month to reach your goal. By entering a few details, you can easily figure out how much you can save for up to 40 years.
Calculate your earnings power in six steps.
A simple interest calculator calculates the interest you’ll earn on your principal over a period of time. The amount of simple interest doesn’t change.
On the other hand, a compound interest calculator takes into account your principal balance and any interest you’ve accumulated previously. The calculator takes your earned interest and reinvests it by adding it to your principal before calculating the next interest period. An account that compounds daily helps grow your funds especially fast and is worth seeking out over monthly or annual compounding.
Calculating compound interest is complicated. You’ll save a lot of time by using an online calculator. But if you want to do it by hand, here’s the equation:
[A = P(1 + {rover n})^{nt}]
Here’s a deeper look at what each of these variables mean:
Suppose you make a $5,000 deposit in a savings account earning 2% APY, compounded daily. Here’s how you’d calculate your interest after five years using the order of operations:
Your savings account balance would be $5525.84 in five years, which means you’ll have earned $525.84 in interest.
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Savings account interest is calculated as a percentage of your total deposit balance, such as 1% APY (annual percentage yield). Most rates are variable, which means your bank can raise or lower rates as the economy fluctuates.
Most banks calculate interest daily or monthly and deposit it into your account monthly. You’ll earn the most money with accounts that compound daily. If left alone, your interest can compound exponentially, making you even more money.
Generally, the higher the interest rate, the greater the earning power. Even a small difference in interest rates can have a substantial effect on your overall savings, so compare a range of savings accounts and shop around for the best possible rate.
The average interest rate for savings accounts in the US is currently 0.05% APY, but many banks offer much better rates. Banks have their own way of calculating interest based on the savings account you choose, so use free interest calculators to get a realistic idea of how much you’ll earn across each type.
As an example, let’s consider the case of Mark, a 25-year-old customer service consultant from Ohio. Having spent money as fast as he earned it throughout his 20s, Mark is ready to start putting some money aside monthly to save for a down payment on a house. He has $1,000 to save and plans to deposit an extra $100 each week, so Mark decides to calculate the difference between two savings accounts — one that pays 2.5% and another that pays 3%.
| Account A | Account B | |
|---|---|---|
| Interest rate | 2.5% APY | 3% APY |
| Initial deposit | $1,000 | $1,000 |
| Ongoing weekly deposit | $100 | $100 |
| Amount saved after 1 year | $6,289.57 | $6,307.69 |
| Amount saved after 3 years | $17,273.73 | $17,412.77 |
| Amount saved after 5 years | $28,820.91 | $29,204.34 |
As you can see, by choosing the account with a 0.5% higher interest rate, at the end of five years, Mark will have saved an extra $383.43.
This table highlights how long your money would last if you had a $10,000 starting balance in a savings account earning 1% interest and withdrew $200, $500 or $1,000 a month.
| $200 monthly withdrawal | $500 monthly withdrawal | $1,000 monthly withdrawal | |
|---|---|---|---|
| Interest rate | 1% APY | 1% APY | 1% APY |
| Initial deposit | $10,000 | $10,000 | $10,000 |
| Ongoing monthly withdrawal | $200 | $500 | $1,000 |
| Your money would run out in… | 51 months | 21 months | 11 months |
There’s no right answer for how much you should have in your savings account. If you’re using it as an emergency fund, it’s recommended to save three to six months of basic expenses. If you’re using it to save for a house or a vacation, those numbers will look different.
Though interest rates help your savings grow, making regular contributions or deposits is the best way to see your growth over time. Setting aside a portion of your regular paycheck — even if it’s only $20 some weeks — will help you reach your goals a whole lot quicker.
Setting up an automatic deposit from your paycheck each pay period is an easy way to save without thinking about it.
Roberta is 18 years old and doesn’t have a particular savings goal in mind, but she wants to start putting money aside for the future. Her grandmother gave her a $1,000 check for her 18th birthday, and Roberta decides to deposit the money into a savings account. However, she also vows to become a more disciplined saver and start putting money aside regularly.
Roberta doesn’t save any money from her weekly paycheck but realizes that cutting back on online shopping could save her $50 a week. If she cuts other unnecessary expenses, like the gym membership she never uses, she can save $100 each week.
By depositing $100 a week, Roberta can save $29,204.34 after five years — only $15,183.06 with $50 deposits weekly.
| $0 weekly deposit | $50 weekly deposit | $100 weekly deposit | |
|---|---|---|---|
| Interest rate | 3% APY | 3% APY | 3% APY |
| Initial deposit | $1,000 | $1,000 | $1,000 |
| Ongoing weekly deposit | $0 | $50 | $100 |
| Amount saved after 1 year | $1,030.45 | $3,669.07 | $6,307.69 |
| Amount saved after 3 years | $1,094.15 | $9,253.46 | $17,412.77 |
| Amount saved after 5 years | $1,030.45 | $15,183.06 | $29,204.34 |
Calculators are a fast way of predicting how your money will grow over time. Remember that a calculator is only as accurate as the information you put into it. If you don’t represent your savings patterns and interest accurately, your results won’t be correct. Be honest about what you’re willing to set aside each week or month to get an accurate projection.
A savings calculator helps you project how much you need to save to reach your financial goals. Play around with the ongoing deposit amount and timeline to see how much you could earn over time. Reach your savings goals even quicker with a high-yield savings account with little to no fees.
What amount of interest earned on a savings account is taxed?
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The Upgrade high-yield savings account offers one of the highest APYs available. The only catch is you need to have a $1,000 balance to earn.
A sinking fund is money that you set aside for an expected upcoming expense, such as Christmas, vacations or car maintenance.
The Ponce Bank high-yield money market account offers 5.28% APY and comes with no account fee and a low $1 minimum opening deposit.
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The banks that offer the best vacation and travel savings accounts are SoFi, Upgrade, Bread, Bask, Varo, Marcus, Barclays and more.
If you struggle to save, you could benefit from a savings account or CD that won’t allow you to withdraw funds.
A compound interest account reinvests your earned interest into your balance. This new balance then continues to earn interest, knowing as compounding.
How to choose the best savings account for your situation.
Some of the top banks with the highest interest rates are Customers Bank, TAB Bank, Cloud, UFB, Bread, Bask, Upgrade, Varo and more.