A savings account is the foundation of any financial plan. This calculator shows you exactly how your money will grow over time through the power of compound interest and regular contributions.
How This Calculator Works
This calculator projects your savings growth by accounting for:
- Initial Deposit: Your starting balance
- Regular Contributions: Monthly or annual additions to your savings
- Interest Rate: The Annual Percentage Yield (APY) your bank offers
- Time Period: How long you'll leave your money to grow
- Compounding Frequency: Most savings accounts compound daily or monthly
The Formula Explained
For savings accounts with regular contributions, your future balance is calculated as:
FV = P(1 + r/n)^(nt) + PMT × [(1 + r/n)^(nt) - 1] / (r/n)
Where:
- P = Initial principal (starting deposit)
- r = Annual interest rate (as decimal)
- n = Number of times interest compounds per year
- t = Number of years
- PMT = Regular contribution amount
Step-by-Step Example
Sarah's Savings Plan
Sarah opens a savings account with:
- Initial deposit: $5,000
- Monthly contribution: $300
- APY: 4.5%
- Time: 5 years
| Year | Contributions | Interest | Balance |
| 1 | $8,600 | $241 | $8,841 |
| 2 | $12,200 | $550 | $12,750 |
| 3 | $15,800 | $916 | $16,716 |
| 4 | $19,400 | $1,340 | $20,740 |
| 5 | $23,000 | $1,825 | $24,825 |
Sarah contributes $23,000 over 5 years and earns $1,825 in interest!
Frequently Asked Questions
What is the difference between APY and interest rate?
APY (Annual Percentage Yield) includes the effect of compound interest, showing your true annual return. The stated interest rate doesn't account for compounding. A 4.00% rate compounded daily yields approximately 4.08% APY. Always compare savings accounts using APY for an apples-to-apples comparison.
How often do savings accounts compound interest?
Most savings accounts compound daily and credit interest monthly. Some compound monthly or quarterly. Daily compounding earns slightly more than monthly compounding. Check your account terms—high-yield savings accounts typically compound daily for maximum growth.
What's a good savings account interest rate?
As of 2024, competitive high-yield savings accounts offer 4-5% APY, while traditional bank savings accounts may offer only 0.01-0.5%. Online banks typically offer higher rates due to lower overhead costs. Always compare rates, but also consider account features and FDIC insurance.
How much should I save each month?
Financial experts recommend saving 20% of your income following the 50/30/20 rule. At minimum, build an emergency fund of 3-6 months of expenses before focusing on other savings goals. Even small amounts add up—$100/month becomes $6,500+ in 5 years at 4.5% APY.
Should I keep all my money in a savings account?
No. Savings accounts are ideal for emergency funds and short-term goals (1-5 years). For long-term goals like retirement, investments typically earn higher returns (7-10% historically). Keep 3-6 months expenses liquid in savings, then invest additional funds for growth.
Is my savings account FDIC insured?
Most bank savings accounts are insured by the FDIC (Federal Deposit Insurance Corporation) up to $250,000 per depositor, per institution. Credit union accounts are insured by NCUA for the same amount. Verify your bank's FDIC status at FDIC.gov before depositing large sums.
What's the difference between savings and money market accounts?
Both are savings vehicles, but money market accounts typically offer slightly higher rates and may include check-writing privileges. Savings accounts are simpler with fewer features. Money market accounts may require higher minimum balances. Both are FDIC insured.
How do I maximize my savings account returns?
To maximize returns: (1) Open a high-yield savings account at an online bank, (2) Set up automatic transfers so you save consistently, (3) Keep minimum balances to avoid fees, (4) Shop around for rates annually—switching banks is easy, (5) Don't let money sit idle in checking accounts.
Key Points to Remember
- Start now: Time is your biggest advantage with compound interest
- Automate savings: Set up automatic transfers on payday
- Compare APY: Online banks often pay 10x more than traditional banks
- Keep emergency fund accessible: Don't lock up money you might need
- Review annually: Rates change—ensure you're getting competitive returns