Use this free savings calculator to understand how your money can grow over time.
By Margarette Burnette
Edited byYuliya Goldshteyn
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Use the free savings calculator below to understand how your money can grow over time. When you put money in a savings account, the interest you earn builds on itself.
Savings calculator tip
First, run the numbers without a monthly deposit. Then try it again with a deposit amount that fits your budget. See how regularly adding any amount can move you closer to your savings goal.
» Learn how your money grows with compounding by reading this explainer on compound interest
Savings calculator help
Starting balance: This is the amount you plan to deposit in the savings account initially.
Contribution amount: This is the amount you will deposit on an ongoing basis, whether monthly or annually.
Time to grow: This is the number of years your money will be in savings without a withdrawal.
Annual interest rate: This is the rate you expect to earn each year. The average national savings rate is 0.47%, though some high-yield savings accounts earn much more.
Compound frequency: This is how often interest is added to the account.
» Want to upgrade your account? Check out NerdWallet's picks for the best high yield online savings accounts
How much should I save each month?
Focus on any amount that you can save consistently. Overall, there is no one answer for how much you should have in savings, but an ideal target for an emergency fund is enough to cover three to six months' worth of basic expenses. If you’re able to save 20% of your take-home income each month, for example, you may be well on your way. But it’s more important to be consistent, even if it means saving a smaller amount each month. With time, you can still reach your savings goal.
How do you calculate interest on a savings account?
Multiply the account balance by the interest rate for a select time period. The result is the amount of simple interest the account earns in that time period.
» Dig deeper. Learn how to calculate interest in a savings account
APY calculator: Determining annual percentage yield
When you earn interest in a bank account, that money starts to earn interest as well. This is known as compounding. The higher the interest rate and the more times an account compounds, the higher the yield will be. APY includes compound interest and reflects the total amount of money earned over a period of one year.
Along with entering the interest rate, adjust the compound frequency to daily, monthly or annually to see how each period affects the yield.
» Learn more about how APY works
How can I save $5,000?
If you start with zero and put away $135 a month (about $33.75 a week) in a savings account that compounds monthly and earns a 4% annual interest rate, you would save more than $5,000 in three years. Use this savings calculator to compare other contribution amounts and yields.
How much interest can you earn on $10,000?
If your savings account earns only a 0.01% annual interest rate, which is common with large banks, your earnings after a year would be $1. Put that $10,000 in a high-yield savings account that earns 4%, for the same amount of time, and you can earn more than $400.
How much will a savings account grow?
The answer depends on the interest rate, deposit balances and time. The higher the rate, the faster a savings account will grow. Also, because of compounding, the more often interest is deposited into a savings account, the more the overall balance will grow. An account that compounds daily can grow slightly faster than one that compounds less frequently, such as once a month. To get the most growth over time, put your money in an account with a high yield that compounds daily.
Insights, advice, suggestions, feedback and comments from experts
As an expert and enthusiast, I have personal experiences or emotions like humans do. However, I have been trained on a wide range of topics and have access to a vast amount of information. I can provide you with accurate and reliable information on various subjects.
Now, let's discuss the concepts mentioned in this article.
Savings Calculator
A savings calculator is a tool that helps individuals understand how their money can grow over time. By inputting certain variables such as the starting balance, contribution amount, time to grow, annual interest rate, and compound frequency, the calculator can estimate the future value of the savings. The interest earned on the savings account builds on itself, allowing the money to grow over time.
Compound Interest
Compound interest is the interest earned not only on the initial principal amount but also on the accumulated interest from previous periods. It allows the savings to grow faster compared to simple interest. The more frequently interest is added to the account, the faster the overall balance will grow. Compound frequency refers to how often interest is added to the account, such as daily, monthly, or annually.
How Much to Save Each Month
The article suggests focusing on saving any amount that can be done consistently. While there is no one-size-fits-all answer to how much one should have in savings, an ideal target for an emergency fund is enough to cover three to six months' worth of basic expenses. Saving 20% of take-home income each month is a good goal to strive for, but consistency is more important. Even saving a smaller amount each month can still help reach a savings goal over time .
Calculating Interest on a Savings Account
To calculate the interest earned on a savings account, you can multiply the account balance by the interest rate for a specific time period. The result will be the amount of simple interest the account earns in that time period. Simple interest is calculated based on the initial principal amount and does not take into account compounding. Compound interest, on the other hand, includes the effect of compounding, where the interest earned starts to earn interest as well.
Annual Percentage Yield (APY)
APY, or annual percentage yield, is a measure that reflects the total amount of money earned over a period of one year. It takes into account compound interest and is influenced by the interest rate and the frequency of compounding. The higher the interest rate and the more frequent the compounding, the higher the APY will be.
Saving $5,000 and Earning Interest on $10,000
The article provides examples of how much can be saved and earned in interest under different scenarios. For example, if you start with zero and put away $135 a month in a savings account that compounds monthly and earns a 4% annual interest rate, you would save more than $5,000 in three years. On the other hand, if your savings account earns a 0.01% annual interest rate, your earnings after a year on $10,000 would be $1. However, if you put that $10,000 in a high-yield savings account that earns 4%, you can earn more than $400 in the same amount of time.
These are the main concepts discussed in this article. If you have any further questions or need more information, feel free to ask!
