🏦 Savings Interest Calculator
How much will a lump-sum deposit earn over a fixed term? Enter the amount, rate and term to see ending balance, interest earned and APY.
Set the tax rate to your marginal bracket if you want an after-tax figure — ordinary savings interest is taxed as income in the US, so a 22% bracket reduces the net return noticeably.
📖 Compounding frequency at a glance
| Frequency | Periods per year | APY when the rate is 4.50% |
|---|
More frequent compounding always helps, but the gain shrinks fast: at 4.50% the jump from annual to monthly compounding is about 0.09 percentage points, while monthly to daily is under 0.01. A higher advertised rate matters far more than the compounding schedule.
How to use the Savings Interest Calculator
Enter your deposit, rate, term and compounding frequency to see how much interest you earn and when.
How it works
Interest is calculated on your principal at the stated rate. Simple interest pays interest only on the original principal, so the annual amount never changes. Compound interest adds each period’s interest back into the balance, so the next period earns on a larger base. The formula is A = P(1 + r/n)nt where n is the number of compounding periods per year.
When to use it
Use it to compare term deposit offers, to find the break-even point between a savings account and a longer-term product, and to check what regular contributions would accumulate to.
Worked example
$20,000 at 4.5 percent APY over 3 years:
| Year | Balance | Interest earned |
|---|---|---|
| Start | $20,000.00 | $0.00 |
| Year 1 | $20,902.29 | $902.29 |
| Year 2 | $21,862.16 | $1,862.16 |
| Year 3 | $22,872.83 | $2,872.83 |
Assumptions and limitations
Rates change, and promotional rates expire after an introductory period. Early withdrawal usually incurs a penalty and forfeits interest. FDIC insurance covers up to $250,000 per depositor per insured bank. Accounts in other currencies carry exchange risk.
Frequently Asked Questions
What is the difference between the interest rate and the APY?
The quoted interest rate (sometimes called the nominal rate) ignores compounding; the APY bakes it in. An account advertising 4.50% compounded monthly has an APY of about 4.594%, because each month's interest earns interest thereafter. When comparing two accounts, compare APYs — that is the number that reflects what you actually earn in a year.
Should I choose simple or compound interest?
It depends on the product, not on preference. A traditional CD that pays interest only at maturity is simple interest. Most high-yield savings accounts compound daily and credit monthly, so choose daily. If your bank's disclosure says interest is credited and reinvested quarterly, choose quarterly. Getting this wrong usually changes the answer by only a few dollars on a one-year term, but the gap widens over multi-year terms.
How much tax will I owe on savings interest?
In the US, interest from savings accounts and CDs is taxed as ordinary income at your marginal federal rate, plus state tax where applicable — there is no preferential rate. A $10,000 deposit earning 4.5% compounded annually for two years produces about $920 of interest, of which a 22% bracket takes roughly $202. Interest is reported on Form 1099-INT once it exceeds $10 for the year, even if it was reinvested rather than withdrawn.
What happens if I withdraw a CD before maturity?
Expect an early-withdrawal penalty, typically three to six months of interest for a one-year CD and up to a year's interest for longer terms. The penalty usually eats the interest earned so far and can dip into principal in extreme cases. That is the real trade-off with a CD: a slightly higher rate in exchange for locking the money up.
🛒 Recommended for You
As an Amazon Associate, Benditools earns from qualifying purchases.