# Savings Account Calculator

By Janet Siroto | Updated June 20, 2024

A savings calculator can be a very helpful financial tool It can let you project your savings account’s performance down to the last penny. By inputting your initial balance, interest rate, and holding period, you can see how your interest rate will work on your behalf. In addition, the calculator can show you how various savings accounts will perform, allowing you to choose the best one.

Among the easiest ways to grow your wealth is to let your savings go to work for you. Savings accounts with high interest rates can be safe investments that can help your extra cash or an emergency fund stay ahead of inflation. Here’s what to know about using a savings calculator, a calculator to work with, and details on how to choose the best savings account.

*Actual interest credited by your financial institution may vary based on institution-specific calculation methodology.

Calculator Definitions

• Initial Deposit: The amount of money you first put into the savings account. It represents the starting point of your savings journey. The larger it is, the more you can earn from interest. In addition, some financial institutions require a specific dollar amount for your first deposit to open the account or secure a higher interest rate.

• Monthly Contribution: The amount of money you plan to add to your savings regularly, typically on a monthly basis. It represents additional contributions beyond the initial deposit that you make over time. For example, you might set up an automatic transfer of \$100 per month from your checking account. Doing so will add to the principal balance, leading to more interest accumulation.

• Time to Grow: The number of years or months you plan to leave your money in the account. It’s the duration over which your initial deposit and subsequent contributions will accrue interest. Generally, longer periods generate more earnings.

• APY (Annual Percentage Yield): APY is the annualized rate of return, taking into account the effect of compounding throughout the time the account grows. Financial institutions provide the APY for the account to show how the interest rate and compounding frequency work together to generate earnings. APY is expressed as a percentage, which you can use to calculate how much your account will grow in one year. Conventional savings accounts currently offer an average APY of 0.57%

However, high-yield savings give more favorable rates and reward your savings habits, providing an APY of over 4.00% at press time.

• Compound Frequency: Compounding refers to when your deposit earns interest. However, financial products have different compounding rates, affecting how much you earn. For example, an account that compounds twice a year earns less than one that compounds every month (provided they have the same interest rate).

The greater the compounding frequency, the more often you earn interest, increasing the account’s APY. Because interest generates returns on both your deposits and past interest earnings, frequent compounding has a snowball effect, allowing your interest to build upon itself.

• Interest Earned: The total amount of interest that accumulates on your initial deposit and any additional contributions over the specified time period. You can calculate this figure with the APY, the compounding frequency, and the time elapsed. Higher interest rates create more earnings.

• Total Contributions: Total contributions represent the sum of your initial deposit and all the monthly contributions made over the specified time period. It gives you a clear picture of how much money you have contributed to the savings account.