Interest on Savings Calculator

What the interest on savings calculator does

The interest on savings calculator shows how much a savings balance grows when it earns interest over time. You enter how much you have saved, the annual interest rate, the number of years, and how often interest is compounded, and the tool returns the interest earned and the ending balance. The maths is the same in any currency; only the symbol on screen changes.

With the interest shown separately from your original balance, you can judge whether a given rate and term are worth committing to.

How interest on savings is calculated

The quoted annual rate is usually applied in smaller slices through the year. If interest compounds monthly, one twelfth of the annual rate is added each month; if it compounds daily, a much smaller slice is added every day. Each time interest is added, it becomes part of the balance and starts earning interest of its own.

The rate per period is the annual rate divided by the number of compounding periods in a year, and the number of periods is the number of years multiplied by that frequency. The ending balance is your starting balance multiplied by one plus the periodic rate, raised to the power of the number of periods. The interest earned is the ending balance minus what you started with.

Because interest builds on interest, the balance grows a little faster than a plain percentage of the starting amount would suggest. Over a few years the effect is modest; over decades it becomes substantial.

How much compounding frequency matters

Many savers assume daily compounding is much better than annual compounding, but the difference is usually small. At a 4% rate, moving from annual to daily compounding adds only a fraction of a percent to the total over a few years.

More frequent compounding gets a little extra out of the same rate but cannot change the rate itself. The "annual equivalent rate" many banks quote already folds the compounding frequency into one comparable number. When you compare accounts, the headline rate and how it compounds together give the return, and the calculator lets you test both.

The three inputs that shape your interest

• Interest is a percentage of the balance, so a larger balance earns proportionally more. Adding to your savings is the most direct way to earn more interest.
• The interest rate has the largest single effect on the outcome. Even a small difference in rate, sustained over years, adds up to a meaningful gap.
• The longer money stays saved, the more compounding helps, because each year's interest joins the balance and earns interest in every year that follows.

How to use the calculator

1. Enter your current savings balance.
2. Enter the annual interest rate the account pays.
3. Enter how many years you plan to leave the money saved.
4. Choose how often interest is compounded: annually, quarterly, monthly, or daily.

The tool displays the interest earned and the ending balance. Adjust the rate and the term to see how sensitive the result is; a longer term and a higher rate usually change it far more than switching the compounding frequency.

Reading the results

The ending balance assumes a constant rate. Real savings rates can change, especially on variable-rate accounts, so treat the figure as an estimate. Fixed-term deposits match the model most closely, because the rate is locked for the term.

• In many places savings interest is taxable, so your net interest will be lower than the figure shown. Entering a rate reduced by your tax band gives a more realistic picture.
• Interest that trails inflation means your money buys less over time even as the balance grows. Comparing your rate with the inflation rate shows whether you are gaining ground in real terms.
• Some accounts pay a headline rate only if you meet conditions, such as making no withdrawals. Read the terms so the rate you enter is the one you will receive.

Comparing accounts

Use the calculator to weigh a fixed deposit against an easy-access account, to see whether locking money away for a higher rate is worth the reduced flexibility, or to check how much extra a longer term would earn. Small choices about where you keep your savings add up over the years.

This article is general information only and is not financial advice.

About This Interest on Savings Calculator

Use this interest on savings calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.