# Savings calculator: how much will your savings grow?

A free calculator that forecasts how much interest you will earn over time

Updated January 4, 2021|6 min read

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Our simple savings calculator can help you see how much interest your savings accounts will earn based on your initial payment, your interest rate (APY), any additional contributions you make, and how long you leave your account to grow.

## How to use the savings calculator

This savings calculator allows you to estimate how much interest you would earn from a savings account or checking account.

To use the calculator, you need to enter your starting balance. This is your initial deposit or how much you start with in the account.

If you plan to make additional deposits each month, you can include those in the monthly contributions box. When you make these additional contributions will impact exactly how much interest you earn. Our calculator assumes that you make the monthly contribution all at once. If you make multiple small contributions throughout the month, the calculations will change slightly.

You can then enter the number of years or months you plan to leave your money in the account. Keep in mind that this calculator assumes you do not take money out of the account for that period. If you do withdraw money, those withdrawals will reduce how much interest you earn.

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## How the interest rate affects you

The biggest factor in how much interest you earn is the interest rate, or annual percentage yield (APY), you have. We set our calculator to start with a rate of 2%.

According to the Federal Reserve Bank of St. Louis, the average interest rate in a savings account is 0.09% nationally. But, quite frankly, such a low rate isn’t going to earn you much of anything. If you put \$100 in a bank account with 0.09% interest and just left it alone to accumulate interest, it would take you about 11 years to earn \$1 of interest. Meanwhile an interest rate of 2% would earn you \$1 of interest in just six months.

If you want a high interest rate, look for a high-yield savings account. Some brick and mortar banks do offer these, but they’re more commonly available from online banks. Online banks have become more common in recent years and while you can’t visit a physical branch, these banks offer the same security and better rates.

Here’s a look at the pros and cons of online banks. When you’re ready to open a new online bank account, our partner Fiona can help you choose the best one for you.

### What is APY?

When you open a savings account, your bank or credit union will advertise an interest rate. You may also see an APY, or annual percentage yield. This APY is how much interest you would effectively earn in one year if you didn’t touch the money in your account.

APY is different from your account’s nominal interest rate because it accounts for compounding interest. That means each month you’ll earn some interest, the interest will get added to your original balance, and then the next month you will earn interest on the new total balance instead of just your initial balance. (Learn more about how compound interest works.

So even though your account is actually earning interest at the interest rate, you’re effectively earning a slightly higher rate by leaving the interest in the account and allowing the account to build off of its own earnings.

APY differs from APR, which is how interest rates are represented for a mortgage or loan. If you’d like to learn more about what APR is, check out our article on APY vs APR.

If you are considering a mortgage, make sure you try our mortgage calculator to help you understand how much house you can afford.

## Beyond the calculator: how to maximize your savings

One of the simplest ways to maximize your savings and meet your savings goals is to leave the money in your account, without making withdrawals. As mentioned above, this allows your interest to build off itself. However, you still won’t earn much if you have a low interest rate, so the best thing you can do to earn more is to find a higher rate.

### Get a high-yield savings account

High-yield savings accounts provide significantly better earnings than traditional savings accounts, allowing you to save much more quickly. Some high-yield accounts earn interest rates of 2.25% or more. That’s 25 times higher than the national average and will earn you interest 25 times as fast.

Read more on these and other types of savings accounts.

### Find a money market account

Money market accounts work very much like a regular savings account. They usually have higher interest rates, but that’s because they usually require you to make a higher initial deposit. It isn’t uncommon for a money market account to require a minimum account balance of \$10,000. This isn’t an option for everyone, but consider one if you have the funds.

### Try a CD

Another type of account to consider as part of your savings plan is a certificate of deposit, or CD.

CDs work a bit differently from your standard savings because you usually cannot withdraw any of the money until the end of your term or else you’ll pay a big fee. The only exception is if you have a no-penalty CD, which allows you to withdraw money early for no fee. (No-penalty CDs aren’t that common and may have lower rates.)

CD terms can last anywhere from one month to 10 years. Longer terms typically come with higher interest rates. For example, you might find that a bank offers a five-year CD with an interest rate of 3% and a one-year CD with a rate of 1%.

Since it isn’t ideal to put your money into an account that you cannot withdraw from, you may want to consider a CD ladder. This is a savings strategy that allows you to regularly have CDs reaching the end of their term by opening multiple CDs with staggered term lengths. Also, learn more about the difference between money market accounts and CDs.

### Watch out for fees

No matter what kind of bank account you have, look out for fees. Banking fees, like an annual fee or overdraft fee, can seriously cut into your savings. These fees are also avoidable, either by opening a different account or managing your money slightly differently. Here’s our roundup of fees you should never pay.

### Is investing an option?

If your goal is to build wealth, you should consider investing. Investing in the stock market isn’t right for everyone because it comes with some risk, but you can make your first investment even if you don’t have much.

Investing is particularly important when you’re saving for retirement. Savings accounts will not give you the kind of growth you need in order to save enough for retirement. For many people, that means saving through your employer’s 401(k) plan, so it’s a good idea to brush up on how a 401(k) works.

If your employer doesn’t offer a retirement plan, consider opening an individual retirement account (IRA). IRAs allow you to save for retirement, while also reducing your income tax bill. A traditional IRA is a good option for many people, but you may also benefit from having a Roth IRA.

Outside of retirement, investing is also a good way to build wealth and save toward other personal savings goals, like making the down payment on a house or preparing to go back to school.

When you do start investing, there are a few terms you will need to learn. For example, you can measure investment growth by looking at an investment’s rate of return, something you probably haven’t done with a simple savings account. Investors also track investment performance over time by looking at year-over-year growth.

To get you started, we created a guide for people who are new to investing.

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