Understand the formula and how it works

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  • With a simple interest rate calculator, you can find out how much money you will make from your savings over time.
  • Simple interest is interest charged only on the amount of money initially deposited.
  • You can increase your savings by regularly making additional deposits into your account.

Simple Interest is exactly what it sounds like: simple.

You can use a simple interest rate calculator to find out how much your money will make if you invest it in accounts that aren’t typically invested in the stock market, such as: B. CDs or bonds (note, however, that the best savings accounts are high-yield accounts). , tend to use compound interest).

Accounts with this structure earn you monthly interest in return for lending your money to the bank. Simple interest is interest that accrues only on the amount originally invested, also known as the principal balance.

Simple Interest Calculator

How to use a savings calculator

In order to use a simple interest savings calculator, you need some information:

Your starting amountThis is the amount you have in your account or will deposit after opening. This could also be called your principal balance.

The interest rate, which can also be referred to as your rate of return or your APY (Annual Percentage Return). This is the amount your capital balance earns interest. Note that if your account has a variable interest rate, the interest rate is subject to change based on economic conditions and Federal Reserve actions. Therefore, keep in mind that your forecasts may change and run your calculations again through the future. However, savings tools like CDs, which have a fixed interest rate, will not change over time.

every regular, additional contributions you could do Saving an additional $500, $100, or $50 a month can add significantly to your savings over time. Experts recommend setting up recurring, automatic deposits into your savings account via your online banking portal or app to make this easier – we tend not to miss out on the money we don’t see. If money is tight, start with a small amount (even $10) and set a calendar reminder to revisit this post in six months and maybe increase.

A Time window. Your income will increase over time, especially if you make additional contributions. How far into the future would you like to see? Usually you can count in months or years. Note that for some savings instruments, such as B. CDs, a predetermined time frame applies, which you agree to in advance, normally between one and five years. Since you cannot withdraw your money beforehand without a penalty, you should take into account the given time frame in your calculations.

Before you enter your numbers, make sure your account uses simple interest — many accounts use compound interest instead.

Simple interest rate example

The formula for simple interest is as follows:

The simple interest formula is P (1+ rt)= A, where P is the initial principal balance, r is the annual interest rate, and t is the time in years

The simple interest formula requires your initial principal balance, annual interest rate, and time in years.

Alyssa Powell/Insider

Suppose you put $800 into a savings vehicle with a simple annual interest rate of 5%. You enter your starting amount ($800), your interest rate (5%), and the number of years (three). After three years of no additional contributions, the calculator shows you have $926 left.

However, a calculator is particularly helpful if you make additional contributions to your savings balance. For example, take the same starting amount of $800 in an account with 5% interest over three years. A savings calculator can help you easily figure out the numbers for three scenarios: deposit an extra $50, $100, or $500 a month.

Simple interest vs. compound interest

If you want to grow your money, simple interest may not be the way to go. Money accumulates much more quickly in a compound interest account.

However, keep in mind that accounts that pay substantial compound interest are often invested in the stock market, which means they take on a risk not found in a bond or CD. Experts typically recommend keeping money you’ll need for the next five years in a savings account or other liquid, single-interest account, and investing money you don’t need for an extended period of time. With a high-yield savings account, you can get the best of both worlds—compound interest plus liquidity.

However, when you invest, compound interest combines the original amount borrowed with interest accrued from previous periods. Essentially, your interest itself earns interest, meaning it grows over time. Compound interest can be incredibly useful in generating investment savings and building wealth. That’s why it’s best to use compound interest when saving and investing whenever possible.

Use our compound interest calculator to calculate your total balance. If you click on “More Details” you will also see your initial investment, your total contribution and your total return.

Your account balance after 5 years

initial investment


total contribution


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