How to Calculate Your Savings Growth
This tool demonstrates the powerful effect of compound interest on your savings or investments over time. Here’s how to use it:
- 1. Enter Initial Deposit (Optional): This is the amount of money you are starting with in your savings or investment account. You can leave this as 0 if you are starting from scratch.
- 2. Enter Monthly Contribution (Optional): This is the amount you plan to add to your savings each month. Regular contributions are key to long-term growth.
- 3. Set Your Rate and Term: Enter the estimated annual interest rate (or rate of return) you expect your savings to earn, and the number of years you plan to let it grow.
- 4. Calculate: Press the "Calculate" button to see the future value of your savings, breaking down how much was your own contribution versus how much was earned through interest.
Frequently Asked Questions
What is compound interest?
Compound interest is the interest you earn on both your original principal and on the accumulated interest from previous periods. It's often called "interest on interest" and is the reason why savings can grow exponentially over time. This calculator automatically computes the compounding on a monthly basis.
What is a realistic annual interest rate?
This can vary greatly depending on the type of investment. A high-yield savings account might offer 3-5%, while a broad stock market index fund has historically averaged around 7-10% annually over the long term, though past performance is not a guarantee of future results. It's often wise to use a more conservative estimate for planning.
Does this calculator account for inflation or taxes?
No. This calculator shows the nominal future value of your savings. It does not account for the effects of inflation (which reduces the purchasing power of your money) or taxes on investment gains. For a more complete picture of your retirement readiness, which does account for some of these factors, please use our detailed Retirement Calculator.