Savings Calculator

The savings calculator shows how your money grows in a savings account over time. Enter the starting amount, amounts you plan to deposit over time, the interest rate of the account and the length of time that you will be saving. The tool will project the balance at the end of the period and show it in two separate areas: the principal amount deposited and the resulting interest earned.

You can adjust for factors like taxes and inflation, account for possible fluctuations in the interest rate or run the calculation backwards.

What is a savings calculator?

A savings calculator is used to estimate the future balance of a checking account, money market account or other interest-bearing account. It's based on the principle of compound interest, in which the balance earns interest each period and that interest then earns more interest in subsequent periods. The longer you leave your money in an account and the more frequently the compounding occurs, the faster the total amount grows.

The interest rate you enter is usually the annual percentage yield (APY). Unlike regular interest rates, APYs already include the effects of compound interest and therefore give the amount that you would actually earn over a year. As standard savings rates can fluctuate, results should be considered estimates. If your bank changes their rates, then the results will change too.

Here's how to use this calculator.

Begin with the four basic elements that are used in everyday life: initial capital, amount added each period, interest rate of the account and number of years to save. Select the frequency of deposits and how interest is calculated. This will allow you to immediately calculate the ending balance and see how your invested money and interest compound together.

Then select the options you want. If you add a tax rate, you can see how much is left after taxes on interest. Selecting inflation factors lets you show the balance in today's dollars. Selecting sensitivity range lets you see the effects of different rates of return. To plan for a savings goal, enter your target amount in the Balance field and leave the other field blank. Or clear out the contribution to calculate how much is needed each period or the number of years to calculate how long it will take.

The formula for calculating savings:

If you start with an initial capital and make a fixed contribution in each period, the final balance will be made up of two components: the growth of the initial capital and the sum of regular contributions. The formula for making a contribution at the end of each period is as follows:

where P is the initial capital, C is the amount added each period, r is the interest rate per year (as a decimal), n is the number of periods per year and t is the number of years. For example, if you deposit $1,000 when opening an account, add $200 every month, have monthly compound interest of 4% and keep it for five years, then r = 0.04, n = 12 and t = 5.

Of that balance, $13,000 is the amount you've contributed (the initial contribution of $1,000 and monthly contributions of $12,000), while about $1,481 is interest. The table below shows each input field with examples.

Factors that affect savings amount:

There are four factors that affect the outcome. The higher the initial deposit amount is, the more capital can earn interest from the start. The larger and more frequent the deposits are, the more will be saved in the long run. This is because each deposited amount grows further over time through compound interest. The higher the interest rate is, the faster the capital will grow. Looking for an account with a high interest rate is usually the easiest way to make improvements. Time also plays an important role, although it's often underestimated. If a savings plan is carried out for ten years instead of five, the earnings are significantly higher than double. This is because over time, interest is calculated on a much higher account balance.

The frequency of compounding interest is also important but not as much so as other factors. If the interest is credited daily it will be added to your account balance more often than if it were annual compounding. This will result in a slightly higher ending account balance for the same stated rate of interest. The effective annual rate that you see at the end reflects this difference.

Create a realistic plan.

Use the actual rate of return and compare it to current high-yield savings account offers rather than relying on average rates which are often reduced by large banks. Set aside some of your savings that can be accessed quickly if needed in case of emergencies. A common rule of thumb is to save an amount equal to three to six months' worth of expenses. Automate a certain amount from your checking account to your savings account on the day you get paid so that saving becomes a habit and not just a one-time decision. For long-term plans, always consider the effects of inflation which reduces your purchasing power and use inflation-adjusted values as the basis for your planning.

This calculator is for general informational and planning purposes only, and does not constitute financial advice. Savings account rates can vary, and actual earnings will depend on the bank where the account is opened, the balance in the account, and taxes. Deposits at U.S. banks are insured by the FDIC up to a statutorily limited amount. Consult with a qualified professional before making any financial decisions.