The value of your savings can be affected by both taxes and inflation. Use our savings interest calculator to determine how much your savings will be affected by these variables. Click the "View Report" button to get more information and a year-by-year savings schedule.
- Years
- The number of years you have to save.
- Monthly contributions
- The amount you will contribute each month to your savings. This calculator assumes that you make your contribution at the beginning of each month.
- Amount currently invested
- Total you have saved to date to be included in this analysis.
- Expected rate of return
- This is the annually compounded rate of return you expect from your investments before taxes. The actual rate of return is largely dependent on the type of investments you select. From January 1970 to December 2008, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 9.7% (source: www.standardandpoors.com). During this period, the highest 12-month return was 61%, from June 1982 through June 1983. The lowest 12-month return was -39%, which happened twice, once from September 1973 to September 1974 and again from November 2007 to November 2008. Savings accounts at a bank may pay as little as 1% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
- Federal tax rate
- Your marginal federal tax rate.
- State tax rate
- Your marginal state tax rate.
- Expected inflation rate
- What you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI), which has a long-term average of 3.1% annually, from 1925 through 2008. The CPI for 2008 was 4.0%, as reported by the Minneapolis Federal Reserve.
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Savings Interest Calculator
A savings interest calculator can help you estimate your present, future, and planned earnings. This enables you to check whether you are near to fulfilling your financial goals or need adjustment.
Steps for using the savings interest calculator
- Enter the details in the savings interest calculator. They include the amount of money you intend to invest initially and the extra amount you may add to your principal regularly later.
- Define the period of time you want the investment to run. This will earn you interest. Enter these details into the calculator.
Things to remember
There is a specific annual return rate attached to every savings account. This is known as APY – Annual Percentage Yield. You should enter this rate after carrying out the above two steps. APY varies with financial institutions; therefore, make sure you know the exact rate.
Another thing to note is the compounding of earnings. You may add this to your savings interest calculator. Compounding implies the additional earnings that are made on the interest already accrued on the savings or investment. Compound interest lets you earn interest on the money you invest as well as on the interest that comes with the earned money. If you know about this compounding rate, you can accurately calculate the amount of interest you can make over a period of time using such a calculator. This is great!
The variables may change with the type of savings. But, a savings interest calculator will let you enter variables as well and render a clear insight into your future earnings. This calculator also helps you compare rates offered by various financial institutions so you can choose a profitable investment alternative. Thus, this online tool is your little money manager, that you can use to ease out of your dollar problems.