Savings Calculator
Calculate the future value of your savings with compound interest. Plan your financial goals with accurate projections for retirement, education, or any savings target.
Formula:
FV = P(1 + r)ⁿ + PMT × [(1 + r)ⁿ - 1] / r
Where FV = Future Value, P = Initial Deposit, PMT = Monthly Deposit, r = Monthly Interest Rate, n = Number of Months
Understanding Savings & Compound Interest
A savings calculator helps you project how much money you'll have in the future based on your initial deposit, regular contributions, interest rate, and time period. The power of savings comes from compound interest - earning interest on your interest, which creates exponential growth over time.
Compound interest is often called the "eighth wonder of the world" because of its remarkable ability to grow wealth. The earlier you start saving and the longer you let compound interest work, the more dramatic the results. Small, consistent contributions over decades can result in substantial wealth accumulation.
The compound interest formula is: FV = P(1 + r)ⁿ + PMT × [(1 + r)ⁿ - 1] / r, where FV is future value, P is initial deposit, PMT is monthly deposit, r is monthly interest rate, and n is number of months.
Common Savings Goals
Emergency Fund
Build a safety net of 3-6 months of expenses. This provides financial security and peace of mind during unexpected job loss, medical emergencies, or urgent repairs.
Retirement Savings
Plan for a comfortable retirement by saving consistently over decades. Take advantage of compound interest and employer 401(k) matching to maximize growth.
Down Payment
Save for a home down payment, car purchase, or other major expense. Calculate how much you need to save monthly to reach your target amount by your deadline.
Education Fund
Save for your children's college education or your own continuing education. Start early to take full advantage of compound growth over 10-18 years.
How to Use This Savings Calculator
- Enter initial deposit: The lump sum you're starting with (can be $0 if starting from scratch).
- Enter monthly deposit: How much you plan to save each month consistently.
- Enter interest rate: The annual interest rate or average return you expect (e.g., 4.5% for savings, 7-10% for investments).
- Enter time period: How many years you plan to save for your goal.
- Review results: See your future value, total deposits, and interest earned to understand your wealth growth.
Frequently Asked Questions
How does compound interest work in savings?
Compound interest means you earn interest on both your initial deposit and previously earned interest. For example, $1,000 at 5% annual interest earns $50 in year 1. In year 2, you earn interest on $1,050, not just the original $1,000. This compounding effect significantly accelerates wealth growth over time.
How much should I save each month?
Financial experts recommend saving 20% of your income using the 50/30/20 rule (50% needs, 30% wants, 20% savings). However, any consistent savings habit is valuable. Start with what you can afford and increase gradually. Even $100/month can grow to over $30,000 in 10 years with compound interest.
What is a good interest rate for savings?
As of 2024, high-yield savings accounts offer 4-5% APY, while traditional savings accounts offer 0.01-0.5%. Online banks typically offer better rates than traditional banks. For long-term savings, consider investment accounts which historically average 7-10% annual returns.
When should I start saving?
Start saving as early as possible. Thanks to compound interest, starting 10 years earlier can result in double the savings even with the same monthly contribution. A 25-year-old saving $200/month at 7% will have $480,000 at 65, while a 35-year-old will have only $240,000.
Should I save or invest?
Keep 3-6 months of expenses in liquid savings for emergencies. Beyond that, consider investing for higher returns on long-term goals (5+ years). Savings accounts offer security and liquidity but lower returns. Investments offer higher growth potential but with market risk.