Savings Calculator

This savings calculator shows what a balance grows to once interest compounds and you keep adding money. Enter a starting deposit, an annual or monthly contribution, the rate, how often interest compounds, the number of years, and a tax rate on the interest. The numbers loaded on this page (a $20,000 start, $5,000 a year rising 3% annually, 3% interest compounded annually, 10 years) end at $92,116.99: $20,000 of your own money to begin with, $57,319.40 of contributions, and $14,797.59 of interest.

What each input changes

Two inputs move the result more than the rest: the contribution and the number of years. In the loaded example, the $5,000 annual contribution supplies $57,319 of the ending balance while interest supplies $14,798, so at a 3% rate over 10 years your deposits are doing roughly four times the work of the bank. Stretch the same plan to 30 years and interest takes over. The annual increase field matters more than it looks, because a contribution that rises 3% a year keeps pace with a raise instead of shrinking against inflation.

The compounding menu changes the answer by less than most people expect. At 3%, compounding daily instead of annually on $20,000 adds about $9 in the first year. The tax field is the one that quietly bites: it takes tax out of the interest every period, so 3% at a 22% bracket earns like 2.34%.

Savings accounts and checking accounts

A savings account holds money you are not spending this week and pays interest on it; a checking account holds money you are spending and usually pays nothing. Both are deposit accounts at a bank or credit union, and both are insured up to $250,000 per depositor, per institution, per ownership category, by the FDIC at banks or the NCUA at credit unions. That insurance is why a savings balance behaves so differently from a brokerage balance: the number only goes up.

The old federal rule capping savings withdrawals at six a month was suspended in April 2020, so the limit is now bank policy rather than law. Plenty of banks still enforce it and charge a few dollars per extra withdrawal, so check the account agreement before treating savings as a second checking account. Even with a cap, savings is far easier to reach than the alternatives. Selling stock takes a settlement cycle, a CD charges an early withdrawal penalty, and pulling from a retirement account before 59 and a half generally costs a 10% penalty plus income tax.

Running both accounts together is the normal setup: one for bills, one for the money that should be earning something. Many banks waive monthly fees when you hold both, and an automatic transfer on payday moves the second one along without you thinking about it.

Rate, compounding, and APY

APY is the number to compare between banks, because it already folds compounding into the rate. A 4.90% rate compounded monthly is a 5.01% APY, and a bank quoting 5.00% APY compounded daily beats it by a hair. Compare APY to APY and the marketing gets much simpler.

The spread between banks dwarfs the spread between compounding schedules. Large branch banks have paid around 0.01% to 0.40% on basic savings while online banks and credit unions competed above 4%. On a $20,000 balance that gap is roughly $800 a year, far more than any compounding frequency will ever hand you. The Interest Calculator and the Compound Interest Calculator break down that part of the math.

Money market accounts and CDs

A money market account is a savings account that usually comes with a debit card or a checkbook, insured the same way up to $250,000. Banks often pay a little more on an MMA, sometimes tiered so balances above $10,000 or $25,000 earn the higher rate, and they often ask for a higher minimum to avoid a monthly fee. Do not confuse it with a money market fund, which is a mutual fund holding short-term debt: those are not FDIC insured, though they carry their own protections.

A certificate of deposit locks the money for a set term, from three months to five years, and pays more for the commitment. Break it early and you typically forfeit three to twelve months of interest. Treasury bills work similarly over short horizons, and their interest is exempt from state and local income tax. The CD Calculator handles the fixed-term version of this same question.

How much to put in

Three rules of thumb cover most situations, and each is a starting point rather than a plan:

• Emergency fund: three to six months of living expenses, held in cash. A household spending $4,000 a month is aiming at $12,000 to $24,000. Freelancers, single-income families, and anyone in a slow hiring market should push toward the top of that range or past it.
• 10% rule: route 10% of every paycheck into savings before you budget the rest. It is blunt, and it works, because the decision gets made once.
• 50/30/20: 50% of take-home pay to needs, 30% to wants, 20% to savings and extra debt payments. On $5,000 a month that is $1,000 going to the last bucket.

The Federal Reserve's household survey has long used a $2,000 emergency expense as its benchmark, and a large share of adults report they could not cover it with cash. If the six-month target feels out of reach, $2,000 is a reasonable first milestone. Beyond that, what you can save depends on rent, income stability, and what you already owe. A credit card at 24% interest outranks a savings account at 4% every time, and the Budget Calculator is the place to work out what is actually left over.

What inflation and taxes leave you

Interest on a savings account is taxed as ordinary income in the year you earn it, and the bank reports it on a 1099-INT once it passes $10. Enter your marginal bracket in the tax field and the calculator applies it every period, which is why a 4% account in a 24% bracket compounds at 3.04%. Then subtract inflation. When prices rise 3% and the after-tax return is 3.04%, the balance is treading water in real terms, and during 2022, when inflation ran above 8% against savings rates near zero, cash lost purchasing power quickly.

That is the argument for keeping only what you need in cash. Money you will spend inside a year belongs in savings, where a bad month cannot touch it. Money you will not touch for a decade has historically done far better in a diversified portfolio, and the Investment Calculator and Retirement Calculator project that side.

When a savings balance gets too big

Nothing stops you from depositing more, but two limits bite at the top end. The first is insurance: past $250,000 in one ownership category at one bank, the excess is uninsured, which you fix by opening an account at a second bank, adding a joint owner, or using a network that spreads deposits across institutions. The second is the return itself. A balance earning 4% while a diversified portfolio has historically averaged closer to 7% after inflation gives up real money over 20 years, and that gap compounds the same way your interest does.

Hitting the number

Automate the transfer for the day after payday and the plan survives a busy month. Name each goal separately, since a pot labeled "roof, $9,000 by June 2028" gets raided far less often than one labeled "savings". Raise the contribution whenever your pay rises, which is exactly what the annual increase field models. Then leave the account alone: at a 3% rate the loaded example adds $14,798 of interest over 10 years, and every early withdrawal takes a slice out of the compounding that produced it.