Savings Calculator

Enter what you have now, what you plan to add, and the rate your bank pays. The schedule shows every month and year: what you put in, what the account earned, and where the balance stands. Raising the contribution increase field models the common habit of saving a bit more each time your pay goes up.

Savings Accounts

A savings account is a deposit account at a bank or credit union that pays interest and keeps your money available. It is meant for cash you are not spending day to day but may need at short notice: an emergency fund, a down payment you are building toward, or money set aside for a trip. In the United States, deposits are insured by the FDIC at banks and by the NCUA at federally insured credit unions, up to $250,000 per depositor, per institution, for each ownership category. That guarantee is what separates a savings account from investments whose value can fall.

Rates vary widely. Large branch banks often pay a small fraction of a percent, while online banks and credit unions frequently offer high-yield accounts that pay several times more, because they have lower overhead and compete for deposits. Rates on savings are variable: the bank can change them at any time, and they tend to move with the Federal Reserve's policy rate. The figure to compare is the annual percentage yield (APY), which already includes the effect of compounding, so two accounts quoting the same APY earn the same amount over a year.

Savings accounts usually come with a few strings. Some charge a monthly fee unless you keep a minimum balance or set up a recurring transfer. Federal Regulation D once limited certain withdrawals and transfers to six per month; the Fed removed that limit in 2020, but many banks still apply their own cap and may charge for extra withdrawals. Interest earned is taxable as ordinary income in the year it is credited, and banks report it on Form 1099-INT once it reaches $10 or more.

Interest is usually calculated daily on the balance and credited monthly. Over a year the difference between daily and monthly compounding is small, but over long periods every bit of compounding adds up, which is why this calculator lets you pick the frequency.

Money Market Accounts

A money market account is a bank deposit account that blends features of savings and checking. It often pays a somewhat higher rate, sometimes in tiers that reward larger balances, and may include checks or a debit card. Minimum balance requirements are typically higher than for basic savings. Money market accounts carry the same FDIC or NCUA insurance, unlike money market mutual funds, which are investments sold by brokerages and are not deposit-insured.

Contributions

For most savers, steady deposits do more to build a balance than the interest rate does. Adding $5,000 a year for ten years puts $50,000 in the account before any interest; at 3%, interest on those deposits adds roughly another $7,000. Small changes in habit add up the same way.

A few ways to make contributions stick:

• Automate it. Schedule a transfer from checking on payday so saving happens before spending.
• Split your direct deposit. Many employers can send part of each paycheck straight to a savings account.
• Raise deposits with raises. When your income rises, increase the transfer by part of the raise; the annual increase field above models this.
• Save windfalls. Tax refunds, bonuses and gifts can go into savings in one step.
• Keep goals separate. Separate accounts or labeled buckets for each goal make progress easier to track.

B = P(1 + i)ⁿ + Σ D·(1 + i)ⁿ⁻ᵏ

B

balance after n months

P

initial deposit

i

monthly rate equivalent to the stated rate and compounding

D

deposit made at the end of month k

Each deposit earns interest only from the month after it is made. Yearly deposits land at the end of every twelfth month and grow by the increase rate you enter.

Saving Too Much?

Holding cash has a cost. Savings rates have often trailed inflation, so money parked for many years can lose buying power even as the balance grows. Cash beyond your emergency fund and near-term goals may do more work in a retirement account, paying down high-interest debt, or a diversified investment portfolio, which carries risk but has historically outpaced inflation over long periods.

A common rule of thumb is to keep three to six months of essential expenses in savings, more if your income is irregular or you support others. Money needed within about three years usually belongs in savings, CDs or Treasury bills. Money not needed for a decade or more can generally take more risk.

Frequently asked questions

Sources

• FDIC – Deposit Insurance
• NCUA – Share Insurance
• IRS – Topic No. 403, Interest Received