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Savings Account Interest Calculator: Simple vs Compound

See the interest a balance earns, and how much extra compounding adds over simple interest.

Updated July 23, 2026More banking & savings tools

Your numbers

Your savings
The account

Interest earned

$4,921

Over 5 years.

Ending balance
$24,921
Simple interest
$4,400

On the original balance only.

Compounding bonus
$521
Effective APY
4.50%
In today's money
$21,497

After 3% inflation.

Where it goes

  • Your balance80%
  • Interest earned20%

Over time

$0$6.5K$13.1K$19.6K$26.2K012345
  • Balance
Year

Your personalized analysis

Summary

You'd earn $4,921 in interest

A $20,000 balance at 4.40% compounded daily grows to $24,921 over 5 years, earning $4,921. That's an effective 4.50% APY once compounding is counted.

Recommendation

Compounding adds $521 over simple interest

Simple interest — earned only on your original balance — would give $4,400. Compounding earns interest on your interest too, adding $521 more over 5 years. The effect grows with time and balance: the longer you leave money untouched, the more compounding does the work.

Recommendation

After inflation, that's worth about $21,497 today

At 3% inflation, the $24,921 ending balance has the purchasing power of roughly $21,497 in today's money — and interest is taxable as ordinary income. Savings interest is ideal for keeping cash safe and liquid, but rarely outpaces inflation after tax, so it suits short-term goals rather than long-term growth.

Next step

Make sure you're earning a competitive rate

Many big banks pay under 0.5% while high-yield accounts pay several times more — for the same FDIC insurance. If your rate is low, the biggest win isn't compounding frequency, it's switching to a better-paying account.

High-yield savings calculator

Example calculations

Worked scenarios with the full analysis, so you can see how the numbers move before entering your own.

$20,000 at 4.4% daily for 5 years

A typical high-yield savings balance left to compound, showing interest and the compounding bonus.

Interest earned

$4,921

Ending balance
$24,921
Simple interest
$4,400
Compounding bonus
$521
Effective APY
4.50%
In today's money
$21,497
Summary

You'd earn $4,921 in interest

A $20,000 balance at 4.40% compounded daily grows to $24,921 over 5 years, earning $4,921. That's an effective 4.50% APY once compounding is counted.

Recommendation

Compounding adds $521 over simple interest

Simple interest — earned only on your original balance — would give $4,400. Compounding earns interest on your interest too, adding $521 more over 5 years. The effect grows with time and balance: the longer you leave money untouched, the more compounding does the work.

Recommendation

After inflation, that's worth about $21,497 today

At 3% inflation, the $24,921 ending balance has the purchasing power of roughly $21,497 in today's money — and interest is taxable as ordinary income. Savings interest is ideal for keeping cash safe and liquid, but rarely outpaces inflation after tax, so it suits short-term goals rather than long-term growth.

$50,000 at 4% for 10 years

A larger balance over a longer horizon, where compounding makes a bigger difference.

Interest earned

$24,590

Ending balance
$74,590
Simple interest
$20,000
Compounding bonus
$4,590
Effective APY
4.08%
In today's money
$55,502
Summary

You'd earn $24,590 in interest

A $50,000 balance at 4% compounded daily grows to $74,590 over 10 years, earning $24,590. That's an effective 4.08% APY once compounding is counted.

Recommendation

Compounding adds $4,590 over simple interest

Simple interest — earned only on your original balance — would give $20,000. Compounding earns interest on your interest too, adding $4,590 more over 10 years. The effect grows with time and balance: the longer you leave money untouched, the more compounding does the work.

Recommendation

After inflation, that's worth about $55,502 today

At 3% inflation, the $74,590 ending balance has the purchasing power of roughly $55,502 in today's money — and interest is taxable as ordinary income. Savings interest is ideal for keeping cash safe and liquid, but rarely outpaces inflation after tax, so it suits short-term goals rather than long-term growth.

$5,000 at 0.4% at a big bank

A balance earning a typical brick-and-mortar rate, illustrating how little low-rate accounts pay.

Interest earned

$101

Ending balance
$5,101
Simple interest
$100
Compounding bonus
$1
Effective APY
0.40%
In today's money
$4,400
Summary

You'd earn $101 in interest

A $5,000 balance at 0.40% compounded monthly grows to $5,101 over 5 years, earning $101. That's an effective 0.40% APY once compounding is counted.

Recommendation

Compounding adds $1 over simple interest

Simple interest — earned only on your original balance — would give $100. Compounding earns interest on your interest too, adding $1 more over 5 years. The effect grows with time and balance: the longer you leave money untouched, the more compounding does the work.

Recommendation

After inflation, that's worth about $4,400 today

At 3% inflation, the $5,101 ending balance has the purchasing power of roughly $4,400 in today's money — and interest is taxable as ordinary income. Savings interest is ideal for keeping cash safe and liquid, but rarely outpaces inflation after tax, so it suits short-term goals rather than long-term growth.

$20,000 compounded annually

The same balance with annual rather than daily compounding, showing the small frequency effect.

Interest earned

$4,805

Ending balance
$24,805
Simple interest
$4,400
Compounding bonus
$405
Effective APY
4.40%
In today's money
$21,397
Summary

You'd earn $4,805 in interest

A $20,000 balance at 4.40% compounded annually grows to $24,805 over 5 years, earning $4,805. That's an effective 4.40% APY once compounding is counted.

Recommendation

Compounding adds $405 over simple interest

Simple interest — earned only on your original balance — would give $4,400. Compounding earns interest on your interest too, adding $405 more over 5 years. The effect grows with time and balance: the longer you leave money untouched, the more compounding does the work.

Recommendation

After inflation, that's worth about $21,397 today

At 3% inflation, the $24,805 ending balance has the purchasing power of roughly $21,397 in today's money — and interest is taxable as ordinary income. Savings interest is ideal for keeping cash safe and liquid, but rarely outpaces inflation after tax, so it suits short-term goals rather than long-term growth.

The basics

Simple vs compound interest

Simple interest is earned only on your original balance — a flat percentage each year. Compound interest is earned on your balance plus all the interest you've already earned, so it accelerates over time. Nearly all savings accounts compound, usually daily or monthly, which is why the amount you actually earn is a little more than the stated rate suggests.

The gap between simple and compound is small over one year but grows meaningfully over many years and larger balances. This is the same force that builds long-term wealth in investments — here it just works at a lower, safer rate. The longer you leave money untouched, the more of your earnings come from compounding rather than your original deposit.

  • Simple interest: earned only on the original balance
  • Compound interest: earned on balance plus prior interest
  • Most savings accounts compound daily or monthly
  • The compounding advantage grows with time and balance

Going deeper

What actually matters for your savings

Compounding frequency — daily versus monthly versus annually — makes only a small difference at typical savings rates. What matters far more is the rate itself. Moving from a big-bank account paying 0.4% to a high-yield account paying 4.4% multiplies your interest roughly tenfold, dwarfing any compounding-frequency effect.

Two other factors quietly reduce your real return: tax and inflation. Interest is taxed as ordinary income, and inflation erodes purchasing power. After both, the real return on cash is often near zero — which is fine for an emergency fund or short-term goal, where safety and liquidity are the point, but a reason to invest money you won't need for many years.

Common mistakes

  1. 1

    Leaving cash in a low-rate account

    Big banks often pay under 0.5% while high-yield accounts pay several times more. The rate matters far more than compounding frequency.

  2. 2

    Chasing compounding frequency

    Daily vs monthly compounding is a rounding error compared to the rate. Focus on the APY, not how often it compounds.

  3. 3

    Forgetting interest is taxable

    Interest is ordinary income. Your after-tax return is lower than the stated rate, which matters for larger balances.

  4. 4

    Keeping long-term money in savings

    Cash rarely beats inflation after tax. Money you won't need for years usually belongs invested.

  5. 5

    Ignoring FDIC limits

    Balances above $250,000 per depositor, per bank aren't insured. Spread very large sums across institutions.

Common questions

How much interest will I earn on my savings?

It depends on your balance, rate, compounding and time. A $20,000 balance at 4.4% compounded daily earns about $4,800 over five years. Enter your numbers above for an exact figure, plus how much extra compounding adds over simple interest.

What is the difference between simple and compound interest?

Simple interest is earned only on your original balance. Compound interest is earned on your balance plus the interest already added, so it grows faster over time. Almost all savings accounts compound, which is why you earn slightly more than the stated rate implies.

Does compounding frequency matter?

Only a little. Daily compounding earns marginally more than monthly or annual at the same rate — a few dollars per $10,000 a year. What matters far more is the interest rate itself: switching from a 0.4% to a 4.4% account changes your earnings dramatically, while frequency barely moves the needle.

Is savings account interest taxable?

Yes. Interest is taxed as ordinary income at your marginal rate, plus state tax where applicable, and banks report it on Form 1099-INT if it exceeds $10. That's why the after-tax return on cash is lower than the headline rate, and why savings suits short-term goals more than long-term growth.

How can I earn more interest on my savings?

The biggest lever is the rate: move idle cash from a low-paying big bank to a competitive high-yield savings account, which often pays several times more for the same FDIC insurance. Beyond that, keeping money invested (for long-term goals) rather than in cash usually earns far more, at the cost of short-term volatility.

Glossary

Simple interest
Interest earned only on the original principal, without compounding.
Compound interest
Interest earned on the principal plus previously earned interest, accelerating growth.
APY
Annual percentage yield — the effective annual return including compounding.
Compounding frequency
How often interest is calculated and added — daily, monthly, quarterly or annually.
Real return
Return after subtracting inflation — what your growth is actually worth in purchasing power.
1099-INT
The tax form banks issue reporting interest income over $10 in a year.

Related tools

The next calculations that usually follow this one.

  • High-Yield Savings Calculator

    Project your balance with monthly deposits — and see how much a high-yield account earns over a big-bank one.

  • Compound Interest Calculator

    See the balance, the split between contributions and growth, and what it actually buys.

  • APY Calculator

    Turn a stated interest rate and compounding frequency into the real annual percentage yield you'll earn.

  • CD Calculator

    See what a CD grows to at maturity, the interest you earn, and how it compares to leaving cash idle.

  • Inflation Calculator

    Translate future dollars into today's purchasing power — the adjustment most plans skip.

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