Savings Interest Calculator
Enter an amount, an annual rate and a term to see the interest earned at maturity and what you keep after tax. Compare simple and compound interest and different tax rates. For reference only.
※ A lump sum with simple interest uses amount × rate × years. With monthly deposits and simple interest, each deposit earns interest only for the months it stays in the account. Compound interest compounds monthly, and monthly deposits are assumed to be made at the start of each month. Banks may calculate the details differently.
※ The 22% and 12% rates are example federal income tax brackets. Your actual rate depends on your income and filing status, state tax may apply, and tax-advantaged accounts such as IRAs work differently.
| Tax scenario | Interest after tax | Total received |
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Lump sum vs. monthly deposits: why is the interest different?
※ This result is a standard monthly-calculation estimate for reference only. Actual payouts depend on the bank’s day-count rules, rates after maturity, how interest is paid and your account agreement. Tax treatment depends on your situation, so confirm details with your bank or a tax professional.
Tax rates and method: example federal income tax brackets (check IRS.gov for current rates) and standard bank calculator formulas
💡 When rates change, come back and run the numbers again. You can save a scenario as a link to compare options.
How to use
How this savings interest calculator works
This savings interest calculator estimates how much interest a deposit earns and how much of it you keep after tax. Pick Lump sum if you put one amount in and leave it, as you would with a certificate of deposit (CD). Pick Monthly if you add the same amount every month, as with an automatic transfer into a savings account. Then choose simple or compound interest, enter the amount, the annual rate and the number of months, and press Calculate. You get the interest before tax, the tax at the rate you select, the interest after tax and the total you would have at the end. Switching between the three tax scenarios updates the numbers instantly without recalculating.
The formulas used
With r as the annual rate written as a decimal (4.5% is 0.045), n as the number of months and i as the monthly rate (r ÷ 12), the calculator uses these standard formulas:
- Lump sum, simple interest: interest = amount × r × (n ÷ 12). Interest is always based on the original deposit.
- Lump sum, compound interest: ending balance = amount × (1 + i)n. Interest is added to the balance every month, so it earns interest too.
- Monthly deposits, simple interest: interest = deposit × r × n × (n + 1) ÷ 24. Each deposit earns interest only for the months it has actually been in the account.
- Monthly deposits, compound interest: ending balance = deposit × (1 + i) × [(1 + i)n − 1] ÷ i. Deposits are assumed to be made at the start of each month.
Interest amounts are rounded down to whole dollars, and the tax is calculated on that rounded interest. Your bank may count days instead of months or round differently, so expect small differences from your statement.
A worked example
Put $10,000 into a 12-month CD at 4.5% a year. With simple interest you earn $10,000 × 0.045 = $450. With monthly compounding you earn about $459, because each month’s interest is added to the balance. If your interest is taxed at 22%, the tax on the $450 is $99, so you keep $351 and end with $10,351. Now compare saving $300 a month for 12 months at the same rate: you put in $3,600 in total, but the simple interest is only about $87, because the first deposit earns 12 months of interest while the last earns just one. The average deposit is invested for about 6.5 months, roughly half the term. The comparison chart under the result shows this visually and tells you how the two options compare for the same total principal.
Why monthly deposits earn less than a lump sum
Many people are surprised that $300 a month for a year earns far less than $3,600 invested on day one. The reason is time. Interest is paid for each day or month your money is in the account. A lump sum works for the whole term, while monthly deposits arrive gradually, so on average they work for about half as long. In the example above, $3,600 as a lump sum at 4.5% earns $162 in a year, while the same $3,600 added over twelve months earns only about $87, or 54% as much. This is not a flaw in the product. It simply reflects that the later deposits had less time to grow. Monthly saving is still valuable because it builds the habit and lets you invest money you do not have yet.
Reading the tax scenarios
Interest from savings accounts, CDs and most bonds is taxed as ordinary income, and banks report interest of $10 or more to you and the IRS on Form 1099-INT. The 22% and 12% choices are examples of federal income tax brackets, and Tax-free shows the pre-tax figure for situations such as interest earned inside a Roth IRA or a traditional IRA where tax is deferred. Your real rate depends on your income and filing status, and state income tax may apply on top. Use the three scenarios as a range and check the current IRS tables or a tax professional for your own case.
APY, APR and the rate to enter
Banks usually advertise an APY (annual percentage yield), which already includes the effect of compounding. This calculator takes a nominal annual rate and applies simple or monthly compound interest to it. If you want your result to match a quoted APY, choose Compound and enter a slightly lower nominal rate. For example, a 4.5% APY corresponds to a nominal rate of about 4.41% compounded monthly. For quick comparisons the difference is small, but it matters when you compare accounts that differ by only a few hundredths of a percent.
Tips for comparing savings products
- Compare APY, not the headline rate. Two accounts with the same stated rate can pay different amounts if they compound at different frequencies.
- Check whether the rate is fixed. A CD usually locks the rate for the term, while a savings account rate can change at any time.
- Know the early-withdrawal penalty. Taking money out of a CD before maturity commonly costs several months of interest.
- Look at minimums and fees. A monthly fee or a minimum balance requirement can wipe out a small rate advantage.
- Stay within insurance limits. Deposits at FDIC-insured banks, and at credit unions insured by the NCUA, are protected up to $250,000 per depositor, per institution, per ownership category.
Frequently asked questions
What is the difference between simple and compound interest?
Simple interest is calculated only on your original deposit. Compound interest is calculated on the deposit plus the interest already earned, so it grows faster the longer you leave it. Over a single year the gap is small, but over many years compounding can add up to much more.
Should I choose lump sum or monthly deposits?
Choose lump sum if you already have the full amount and plan to leave it untouched, as with a CD. Choose monthly if you add money regularly from your paycheck. The tool treats them as two separate products so you can see how timing changes the interest.
Is the interest I earn taxable?
In most cases yes. Interest on savings accounts and CDs is taxable income in the year it is paid or credited, even if you do not withdraw it. Interest inside certain retirement accounts is treated differently, and some government and municipal bond interest is exempt from some taxes. The tax boxes here are examples to help you plan.
Which tax rate should I pick?
Pick the rate closest to your federal bracket, or select Tax-free to see the pre-tax result. If you are unsure, compare the 22% and 12% scenarios to see the range. Remember that state taxes can add to the total and that your bracket depends on your total taxable income.
Why is my bank’s figure slightly different?
Banks may compound daily, count actual days in the month, round each month’s interest to the cent, or use a different rate after a promotional period. This calculator uses standard monthly formulas and rounds down to whole dollars, so treat the result as a close estimate rather than an exact statement.
Is the 4.5% in the example a real rate?
No. It is only an example. Savings and CD rates change with the economy and differ from bank to bank, so enter the actual rate you are offered. You can use the Copy link button to save a scenario and compare offers side by side.