Savings Account Interest Calculator
See how a high-yield savings account grows from an initial deposit and regular contributions. Includes APY compounding and a year-by-year balance chart.
HYSAs currently pay 4–5%.
Recommended next steps
How it works
- 1Enter your starting balance
What you have in the account today (or $0 to model a fresh start).
- 2Add monthly contributions
Most people get the best results from automating a fixed monthly transfer.
- 3Pick the APY and timeline
High-yield online banks currently pay 4–5% APY.
A savings account is the single best home for short-term cash. It's safe, FDIC-insured up to $250,000 per bank, and high-yield online accounts now pay 10–50× more than traditional brick-and-mortar banks. The difference compounds dramatically over time.
The math. APY (Annual Percentage Yield) is the effective rate after compounding. Most online savings accounts compound daily, so a stated 5% APR becomes about 5.13% APY. The calculator above uses APY directly, so you don't need to convert.
Typical savings goals: emergency fund (3–6 months of expenses), down payment fund (1–5 years out), short-term goals like a wedding or vacation, and 'cash buffer' for irregular bills. For anything 5+ years away, broader investments usually win — even after factoring in volatility.
Watch out for taxes. Savings interest is taxed as ordinary income at your federal and state rate. A 5% APY is roughly 3.6% after federal taxes for someone in the 28% bracket. Account for this when comparing to municipal bonds or other tax-advantaged options.
Where to find good rates: online-only banks (Ally, Marcus, Discover, Capital One 360, Wealthfront Cash), credit unions, and brokerage cash management accounts. Avoid 'teaser' rates that drop after 6 months — look for consistently competitive APYs.
Example scenarios
Grows to ~$8,000. About $750 in interest, $6,000 in contributions, plus the starting amount.
Grows to ~$54,500. Strong way to fund a future down payment.
Grows to ~$25,000. Aggressive emergency fund / wedding savings.
What affects your result?
Doubling the APY from 2.5% to 5% nearly doubles annual interest on the same balance. The single highest-leverage variable for short-term savers — and the easiest to change.
Compounding is small year 1, meaningful year 5, and powerful year 10+. A $20K balance at 5% earns $1,000 the first year and roughly $1,600 in year 10 — pure compounding, no extra deposits.
Adding $200/month to a $10K starting balance over 10 years at 5% adds about $31,000 in deposits and ~$8,500 in extra interest. Automation beats willpower.
Interest is taxed as ordinary income. At 24% federal, your effective return drops from 5% APY to about 3.8%. State taxes (where they apply) trim it further.
A 5% APY in a 3% inflation environment is a 2% 'real' return. Savings preserves purchasing power; long-term wealth-building usually needs invested assets.
Common mistakes to avoid
- Leaving the emergency fund at a brick-and-mortar bank earning 0.01% — over 10 years, that's $5,000+ of missed interest on a $10K balance.
- Chasing teaser rates that drop after 3–6 months — read the fine print before moving the entire emergency fund.
- Forgetting that savings interest is reported on Form 1099-INT and owed in your top marginal bracket.
- Using a savings account for goals 7+ years out where invested accounts have historically been far more efficient.
- Keeping more than $250K in a single bank account and losing FDIC coverage on the excess.
Common questions
What's the difference between APR and APY?
APR (Annual Percentage Rate) is the simple interest rate. APY (Annual Percentage Yield) is the effective rate after compounding. A 5% APR compounded daily is closer to 5.13% APY. Banks usually advertise APY for savings accounts and APR for loans.
What's a good savings interest rate?
As of 2026, high-yield savings accounts (HYSAs) pay around 4–5% APY. Traditional big-bank savings accounts often pay 0.01–0.5%. The difference is enormous — $10,000 earns $400/year at 4% versus $1/year at 0.01%.
How does compounding frequency affect savings?
More frequent compounding means slightly higher returns. Daily compounding at 5% beats monthly compounding at 5% by a small but real amount over many years. Most online banks compound daily.
Should I use a savings account or invest?
Savings accounts are best for emergency funds (3–6 months expenses) and short-term goals (under 5 years). For long-term goals like retirement, broader investments historically outpace savings rates by a wide margin.
Are savings interest taxes a big deal?
Interest is taxed as ordinary income. At a 24% federal bracket, a 5% APY is closer to 3.8% after taxes. For tax-free growth, look at Roth IRAs and 529 plans for relevant goals.
Is my money safe in a high-yield savings account?
Yes, up to $250,000 per depositor per FDIC-insured bank (or NCUA-insured credit union). If a bank fails, the FDIC pays insured deposits back, typically within a few business days. For balances above $250K, split across multiple banks or use a 'cash sweep' product that spreads deposits across partner banks automatically.
How is savings interest actually calculated?
Most online banks calculate interest daily using your end-of-day balance, then credit it to your account once a month. The formula is roughly: daily interest = (balance × APY) ÷ 365. So a $10,000 balance at 5% APY earns about $1.37 per day, paid out at month-end.
Why did my bank's APY drop?
Savings APYs track short-term interest rates set by the Federal Reserve. When the Fed cuts rates, HYSA rates usually follow within weeks. Unlike a CD, a savings account's rate is variable and can change at any time without notice.
Should I open a CD instead of a savings account?
CDs lock in today's rate for a fixed term — useful if you expect rates to fall and you won't need the money. A savings account stays liquid but the rate floats. A common middle ground is a 'CD ladder' (e.g., split funds across 6, 12, 18, 24-month CDs) so part of the balance matures each period.
How much should I keep in savings vs invested?
A common framework: 3–6 months of expenses in a savings account as an emergency fund, plus any cash you'll need within 2–3 years (down payment, planned big purchase). Everything beyond that, with a 5+ year horizon, typically belongs in invested accounts where higher long-run returns offset short-term volatility.
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