How savings grow
Two things build a savings balance: what you put in and the interest it earns. Interest compounds — each month's interest is added to the balance and earns interest itself — so growth speeds up over time. Over short periods deposits do almost all the work; over decades, interest can become the larger share.
High-yield savings accounts at online banks typically pay several times the national average rate. The difference looks small in a single year but adds up on larger balances and longer horizons.
Getting the most from a savings account
Automate a monthly transfer on payday so saving happens before spending. Compare APYs rather than interest rates, watch for minimum-balance requirements and monthly fees, and keep accounts within FDIC or NCUA insurance limits.
For money you won't need for a year or more, a CD can lock in a rate; for long-term goals like retirement, tax-advantaged investment accounts usually beat savings over time, with more risk.
The formula
Balance = P × (1 + i)^n + D × ((1 + i)^n − 1) ÷ i- P = starting balance
- D = monthly deposit
- i = monthly rate = (1 + APY)^(1/12) − 1
- n = number of months
Example
- Start with $5,000, add $300 a month, earn 4% APY for 10 years.
- Monthly rate i = 1.04^(1/12) − 1 ≈ 0.3274%.
- You deposit $41,000 in total, and the balance grows to about $51,500 — roughly $10,500 of it interest.
Frequently asked questions
Does it matter when in the month I deposit?
Slightly. This calculator assumes deposits at the end of each month, which is conservative; depositing at the start earns one extra month of interest on each deposit.
Is savings interest taxable?
Yes, interest from US savings accounts is taxable as ordinary income in the year it's paid, and the bank reports it on Form 1099-INT.
What about inflation?
If your APY is below inflation, your money loses purchasing power even as the balance grows. Comparing your APY to the current inflation rate shows your real return.
Sources
Last reviewed for 2026. How we calculate.