Savings calculator for high-yield savings accounts

How savings account interest is calculated

A high-yield savings account advertises its APY (annual percentage yield), the return over a full year including compounding. Banks usually compound daily and credit the interest monthly. The calculator converts APY into an equivalent monthly rate:

\[ \text{monthly rate} = (1 + \text{APY})^{\dfrac{1}{12}} - 1 \]

\[ \text{balance next month} = \text{balance} \times (1 + \text{monthly rate}) + \text{deposit} \]

The tool counts deposits at the end of each month, so they start earning the month after.

APY, APR and FDIC insurance

APY includes compounding; APR does not. A 4.00% APR compounded monthly is a 4.07% APY, so always compare accounts on APY. Savings rates are variable: the bank can lower yours at any time, so rerun the numbers if it changes.

FDIC insurance protects deposits up to $250,000 per depositor, per bank, per ownership category. Interest earned is generally taxable income for the year, even if you leave it in the account.

Savings calculator: an example with monthly deposits

Take $5,000 to start and $200 a month at a 4.00% APY. First, over one year you deposit $2,400. Then interest builds on the growing balance. Next, the second year earns interest on the first year's interest too. So the balance grows faster each year, even at a steady rate.

For example, $10,000 at a 4.00% APY earns about $400 in a year. Add the savings goal feature to see how many months you need to reach, say, $20,000.

Savings calculator: choosing a high-yield account

Pick an account with care. Here is a quick checklist.

• Compare the APY, not the APR.
• Confirm FDIC (or NCUA) insurance.
• Check for monthly fees and minimum balances.
• Look at how fast you can move money out.

Also, online banks often pay more than branches. However, the rate is variable, so rerun the numbers every few months. In addition, keep an emergency fund of three to six months of expenses here.

Savings calculator: go further with related tools

For longer goals, compare other paths. First, project growth with the compound interest calculator. Then plan retirement with the 401(k) calculator. Next, see if paying down debt wins, using the mortgage payoff calculator.

Finally, use the percentage calculator to measure a gain. Rates shown are examples, so check your bank's current APY.

Also, set a reminder every six months to review your plan. That way, you adjust your deposits to your budget and your goals, and you keep your savings habit strong through changes in income or rates.

Stay consistent, since consistency is the key to any savings plan.

Also, automate the habit so it needs no willpower. A small amount moved on payday adds up faster than most people expect over several years of steady effort.

Savings calculator: set a goal and a pace

A clear goal helps you save. First, pick an amount, such as $12,000. Then set a date, say 3 years. Next, divide: 12,000 ÷ 36 gives $333 a month, before interest. Finally, schedule an automatic transfer on payday.

That way, you reach your goal without thinking about it. For example, at a 4% APY the interest adds roughly $700 over three years. However, your steady effort matters most. In fact, the rate matters less than your discipline. Use the goal feature to see how many months a given deposit needs.