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Savings Calculator

Thumbnail image of Alastair Hazell Creator: Alastair Hazell. Reviewed: Chris Hindle, Chartered ALIBF.
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The nominal interest rate is the standard annual rate excluding compounding. The APY/AER figure includes compounding, and is often quoted on savings products.
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Increase deposits yearly with inflation?

To calculate:

  • How much to save each month to reach a goal
  • How long it might take to save a target figure

give our Savings Goal Calculators a try.

Use our savings calculator to work out the interest and future value of your savings, IRA, ISA, bond or investment.

Disclaimer: Whilst every effort has been made in building these savings calculators, we are not to be held liable for any special, incidental, indirect or consequential damages or monetary losses of any kind arising out of or in connection with the use of them. Full disclaimer. These tools are here purely as a service to you, please use them at your own risk.

How to calculate your savings growth

Use our savings calculator to project the growth and future value of your savings or investments over time. It uses the compound interest formula, incorporating options for daily, weekly, monthly, quarterly, half-yearly and yearly compounding as well as regular deposits.

If you're unsure about the compound interval you're receiving on your savings account, you should be able to find out by speaking to your bank or financial institution. It's also worth noting that our savings calculator also allows you to enter negative interest rates, should you wish to use one.

Before exploring some of the options available for growing your savings, let's address a few frequently asked questions about our calculator, inspired by user feedback.

What is the effective annual rate?

The effective annual rate (also known as the APY or AER) is the rate that actually gets paid after all of the compounding. When compounding of interest takes place, the effective annual rate becomes higher than the nominal interest rate. The more times the interest is compounded within the year, the higher the effective annual rate will be. You can learn more about effective annual interest rates in our article here.

Why does a 5% APY yield less than a 5% nominal interest rate?

If you're comparing an APY/AER with a nominal interest rate, it's important to recognize that an APY incorporates the effects of compound interest within the year, while a nominal rate does not. For this reason, it can make it seem like you'll end up with less money when entering an APY.

Let's explain it with a comparison. We'll say your interest rate is 5% per year compounded monthly:

  • Nominal Rate (compounded monthly): If you have a 5% per year nominal interest rate compounded monthly, this effectively becomes 5.12% APY due to the addition of interest on top of interest earned in previous months (compounding).
  • APY (already compounded): Conversely, if you start with a 5% APY, which indicates a rate that already includes compounding, the equivalent nominal rate (if you were to reverse the calculation) would actually be around 4.89%.

You're therefore comparing a 4.89% nominal rate (5% APY) with a 5% nominal rate (5.12% APY). So, you'll earn more if your 5% quoted rate is a nominal rate, rather than a APY/AER.

Now we're finished with the frequently asked questions, let's look at some common ways to save and maximize your savings potential.

What is the best way to save?

The answer to this question very much depends on what you're saving for, and how long you're looking to lock your money up for. Your strategy for shorter term savings goals like a new car or holiday may be different from saving for your first home or securing a comfortable retirement. So, it's not a case of 'one size fits all', rather about finding a custom approach for your goals. Here are some of the most common savings options available:

Exploring your options

  • Savings Accounts: These are a staple for risk-averse individuals. Savings accounts offer you a secure place to store your funds, though interest rates are normally quite low. You can check out Bankrate for a useful comparison of the best savings account rates.
  • Stock Market Investments: If you're seeking higher returns and are willing to embrace market volatility, the stock market can be a rewarding place. If you consider yourself a beginner, you can start with guides from Investopedia to understand the basics.
  • Tax-Advantaged Accounts: In the US, Individual Retirement Accounts (IRAs) provide tax advantages for retirement savings. Similarly, in the UK, Individual Savings Accounts (ISAs) offer a tax-free way to save and invest. They're an option worth considering because of their tax breaks. Investor.gov (US) and Money Helper (UK) offer detailed information on these options.
  • Peer-to-Peer Lending: This is an alternative investment with potentially higher returns than traditional savings, albeit with increased risk.

Risk tolerance

Before making any big decisions, it's always advisable to consider and assess your personal risk tolerance: Are you risk-averse or are you inclined towards a high risk, high reward strategy? Diversification - spreading your investments across various channels - can help mitigate risk and maximize returns. The Twelfth Magpie offers an excellent guide on how to diversify your investments effectively.

Seeking professional advice

For personalized advice, it's worth considering speaking with a qualified, independent financial advisor. An advisor can tailor investment strategies based upon your personal circumstances, risk tolerance and financial goals.

Through regular reviews with your financial advisor, you can adapt your investment strategies to cater for changes in your life circumstances, market fluctuations, or evolving financial objectives. This helps ensure your plan remains aligned with your goals.

To help you find a reputable advisor, consider the Financial Planning Association (US) or Unbiased (UK).