How much interest will I earn on $10,000?

You can use the same calculation, or an interest rate calculator like the one at GOBankingRates , for any amount of money. Make sure to enter the APY, not the interest rate, in the calculator for an accurate calculation. A 3% APY on $10,000, compounded monthly, will earn $10,300.05.

Which bank gives 7% on a savings account?

Although interest rates have been rising steadily, no U.S. bank or financial technology company currently offers 7% interest or APY on their savings account. Digital Federal Credit Union offers one of the highest APYs for a savings account, at [info-gbr-rate institution="digital-federal-credit-union" product="Online Savings Account"] with its Primary Savings Account, provided you meet all of the requirements. Otherwise, you may be able to get a 7% return with the stock market or with a 401(k) investment. If you want your savings to grow, set a savings goal to add a small -- or large-- amount to your account monthly. You'll earn interest on your principal, your interest and the savings you add each month.

How much interest will $50,000 earn in a savings account?

Here's how to calculate simple interest and compounding interest at 3% APY. Simple interest: $50,000 X 0.03 = $51,500 Compound Interest (at 3% APY) equates to $51,500.24

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How To Calculate Interest in a Savings Account

October 2, 2024

7 min Read

Written by Daria Uhlig

Edited by Melanie Grafil

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The average savings account interest rate in April 2024 is only 0.46%. This number includes low interest rates from traditional banks as well as higher savings rates from online banks and neobanks like Bread Financial, which offers APY on savings.

See: Owe Money to the IRS? Most People Don’t Realize They Should Do This One Thing

With interest rates this high, you might want to figure out exactly how much you can earn with a high-yield savings account. Calculating interest earned can encourage you to save even more as you watch your money grow.

What Is Interest on a Savings Account?

Interest is the money the bank or financial technology company pays you for keeping your savings with them. When you open a bank account and make a deposit, the bank lends that money out to earn profits and keep money circulating through the economy. The bank pays you a small percentage as an incentive to keep your money in the account.

The bank holds enough reserves to cover withdrawals, so your money is always available. And, if for some reason the bank experiences a “bank run,” where a lot of customers withdraw money at the same time, your money is FDIC-insured up to $250,000 per account holder, per account category, per bank.

What’s the Difference Between Compound and Simple Interest?

There are two types of interest payments: simple and compound. If you are earning simple interest, you earn interest on the money you deposited, known as the principal. You do not earn money on the interest that accrues.

However, most banks and neobanks pay compound interest. When interest is compounded, the interest you earn gets added to the principal. The next time the bank calculates the saving account interest, it includes the interest already earned.

Interest may be compounded daily, weekly, or monthly. If interest compounds daily, your savings will grow by the day, leading to higher returns from your savings account.

What’s the Difference Between Interest Rate and APY?

When a bank shows you its savings account rate and APY side by side, you’ll see that the APY is higher. That’s because the rate tells you what percentage of your savings account balance the bank pays annually, but it doesn’t reflect the fact that your interest is calculated more than once a year, and the dollar amount you earn grows progressively higher with each calculation.

For example, many banks compound interest daily and apply it to your balance once per month. While the interest rate is the same each day, it’s applied to a slightly higher balance each time because of compounding. So on Day 1, you earn interest on your principal, but on Day 2 you earn it on the principal plus the interest earned on Day 1. APY is the percentage you yield over the course of the year, taking compounding into account.

You can think of simple interest as the amount of interest the bank pays, and APY as the amount you receive.

Take a look at Bask Bank’s high-yield savings APY of . The account’s interest rate is only . But because Bask Bank compounds the interest, account holders earn a dollar amount of interest equal to per year.

Good To Know

CD rates work the same way as savings account rates — your interest is compounded and is reflected in the APY.

How To Calculate Simple Interest

When you start calculating simple interest, you’ll need to know a few things:

Principal amount
Rate of interest
Time period to which rate applies

The formula for calculating simple interest is P x R x T

To calculate simple interest on an account holding $1,000 and earning 4.97% interest each year, the math would equate to:

$1,000 x 0.0497 x 1 year= $49.70 in simple interest

How To Calculate the Simple Interest Rate

Imagine for a moment that your balance earns simple interest, not compound interest.

If you were looking through a bank statement and wanted to figure out the interest rate based on the amount of interest credited to your account, you’d need to look at both the amount credited and your balance before the interest was added. Then you could use this formula from CueMath: Part/Whole = Percent/100.

An easier way is to use an online percentage proportion calculator, which can solve “X is what percent of Y?”

For example, say you had a $10 interest credit on May 1 based on a $25,000 balance. You’d enter 10 for X and 25,000 for Y. The answer is 0.04%.

How Do You Calculate the Real Interest Rate?

You might consider APY to be the “real” interest rate because it reflects the amount you actually earn on your deposits. As Chase Bank illustrates, the calculation for that is far more complex that calculating simple interest:

APY = 100 [(1 + Interest/Principal)(365/Days in term) – 1]

GOBankingRates’ online savings calculator is a much easier way to find out how much interest you could earn on your savings — or on your interest-bearing checking account, for that matter — with compound interest.

How Much Interest Will I Get on $1,000 a Year in a Savings Account?

If you find a high-yield savings account with an APY of 4% or more, your money can really add up quickly. To calculate interest and APY on $1,000 with a 4.97% interest rate, you’ll need to know:

Your principal balance
Your interest rate
How often interest is compounded in a year
Number of time periods that have passed (or will pass)

If you were to calculate simple interest on the $1,000 using the P x R x T formula, you would see that at the end of one year, you’d have $49.70 in your savings account. Plug those numbers into a compound interest calculator that assumes monthly compounding, and the interest grows by $1.15, for an APY of 5.10%.

FAQ

Here are the answers to some of the most frequently asked questions about calculating interest on savings accounts.

How much interest will I earn on $10,000?
- You can use the same calculation, or an interest rate calculator like the one at GOBankingRates, for any amount of money. Make sure to enter the APY, not the interest rate, in the calculator for an accurate calculation.
- A 3% APY on $10,000, compounded monthly, will earn $10,300.05.
Which bank gives 7% on a savings account?
- Although interest rates have been rising steadily, no U.S. bank or financial technology company currently offers 7% interest or APY on their savings account.
- Digital Federal Credit Union offers one of the highest APYs for a savings account, at 6.17% with its Primary Savings Account, provided you meet all of the requirements.
- Otherwise, you may be able to get a 7% return with the stock market or with a 401(k) investment. If you want your savings to grow, set a savings goal to add a small -- or large-- amount to your account monthly. You'll earn interest on your principal, your interest and the savings you add each month.
How much interest will $50,000 earn in a savings account?
- Here's how to calculate simple interest and compounding interest at 3% APY.
  - Simple interest: $50,000 X 0.03 = $51,500
  - Compound Interest (at 3% APY) equates to $51,500.24

Dawn Allcot contributed to the reporting for this article.

Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of April 30, 2024.

The information related to the Chase Savings℠ account was collected by GOBankingRates and has not been reviewed or provided by the issuer of this product. Product details may vary. Please see the issuer’s website for current information. GOBankingRates does not receive commission for this product.

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