How to use the savings calculator
There are two tools. Grow my savings answers “how much will I have?” Reach a goal answers “how much do I need to save?”
Grow my savings
- Starting balance: what is in the account today. Enter 0 if you are starting fresh.
- Monthly deposit: the amount you plan to add at the end of each month.
- APY: the annual percentage yield shown on your bank’s rate page. US banks are required to quote it, so it is easy to find.
- Years: how long you plan to save.
The chart shows the balance next to the money you deposited; the gap between the lines is interest. The table gives the same figures year by year.
Reach a goal
- Savings goal and current savings. The target amount and what you already have set aside for it.
- APY, as above.
- What you save now each month (optional). The calculator then tells you how long your current habit would take.
- Deadline, as a number of months or a target month. With a target month, deposits run from the end of this month up to the month before the target.
How the calculation works
Savings accounts quote an APY, the yield after a full year of compounding. Because you deposit monthly, the calculator first converts the APY into the monthly rate that compounds to exactly that APY:
The balance after n months of end-of-month deposits is the future value of the starting balance plus the future value of the deposits:
To reach a goal G, the same equation is solved for the deposit:
“How long at my current deposit” solves the first formula for n and rounds up to the next whole month.
A worked example
Growing savings. You have $5,000 and add $300 a month at 4% APY for 10 years. You deposit $41,000.00 in total, interest adds $10,410.00, and the balance reaches $51,410.00. In the final year alone, interest brings in $1,901.86.
Reaching a goal. You want $25,000 in 36 months and have $5,000 today. At 4% APY the required deposit is $508.00 a month. You put in $18,288.01 and interest supplies the remaining $1,711.99. Saving $400 a month, as you do now, would take 3 years 9 months.
Time and deposit size matter more than the rate
People spend a lot of effort chasing an extra half-point of yield. For a saver who is still building a balance, the deposit and the time horizon usually matter more. Using the example as the base:
| Change | Balance after the period | Interest earned |
|---|---|---|
| The example: $300 a month, 4%, 10 years | $51,410.00 | $10,410.00 |
| No monthly deposits | $7,401.22 | $2,401.22 |
| $500 a month instead | $80,749.18 | $15,749.18 |
| APY of 1% (a typical branch account) | $43,359.39 | $2,359.39 |
| APY of 5% | $54,453.42 | $13,453.42 |
| 20 years instead of 10 | $120,108.13 | $43,108.13 |
Rate does matter when the alternative is a near-zero account: moving from 1% to 4% is worth about $8,000 here. Between two competitive accounts, though, a small rate difference changes the result far less than adding to the monthly deposit. Our APY calculator compares accounts side by side, fees included.
Setting a realistic deadline
The required deposit falls quickly as the deadline moves out, because each extra month adds both a deposit and more time for interest to work. For the same $25,000 goal:
| Deadline | Monthly deposit needed | Interest earned |
|---|---|---|
| 24 months | $786.02 | $1,135.56 |
| 36 months | $508.00 | $1,711.99 |
| 60 months | $285.84 | $2,849.49 |
On goals a few years away, interest does only part of the work, and the deposit you commit to does the rest. If the required amount does not fit your budget, a later date or a smaller first target is usually more useful than a plan you will abandon. Many people automate the transfer on payday so that saving happens before spending.
APY versus the interest rate
Some banks also show an “interest rate” next to the APY. The interest rate is the nominal rate before compounding; the APY includes compounding and is the number to compare. If you only have a nominal rate, convert it first with the APY calculator, or use the compound interest calculator, which takes a nominal rate and a compounding frequency directly. If you will lock money away for a fixed term, a CD calculator shows the result for that product.
What this calculator does not include
- Rate changes. Savings rates are variable; the APY you enter is assumed to hold for the whole period.
- Taxes. In the US, interest on a regular savings account is taxed as ordinary income each year, which lowers what you keep. Tax-advantaged accounts work differently.
- Inflation. A balance that grows at 4% while prices rise at 3% gains about 1% a year in buying power. The inflation calculator converts future dollars into today’s money.
- Fees and minimum balances. Monthly maintenance fees can wipe out the interest on a small balance.
- Exact crediting dates. Banks usually accrue interest daily and credit it monthly; the monthly model here is a close approximation, not a statement-exact figure.