How Much Interest Will I Earn on My Savings?

To estimate the interest a savings balance earns in a year, multiply the balance by the advertised annual rate. At 4.5%, a balance of 100,000 earns about 4,500 a year, or roughly 368 a month to begin with. That one multiplication answers most "how much will I earn" questions, and the interest earned calculator does it instantly along with the monthly figure and multi year growth.

The details below cover why the monthly figure is not simply the yearly figure divided by twelve, what happens over several years, and the traps that make real world results differ from the headline number.

The Formula

yearly interest  = balance x rate
monthly interest = balance x ((1 + rate)^(1/12) - 1)
after t years    = balance x (1 + rate)^t

The rate here is the annual equivalent rate, written as a decimal (4.5% is 0.045). Banks in the UK advertise this as AER and banks in the US call it APY. Both mean the same thing: the total effect of one year of compounding, which is exactly why the yearly estimate is a single multiplication.

Worked Examples

10,000 at 4.5%

Yearly: 10,000 x 0.045 = 450. Monthly, about 37 to start. Over five years untouched, the balance grows to 10,000 x 1.045^5, which is about 12,462, so 2,462 of interest rather than 5 x 450 = 2,250. The extra 212 is compounding: each year's interest earns interest in the years that follow.

100,000 at 4.5%

Yearly: 4,500. Monthly, about 368 to start. This is the classic "could I live off the interest" scale of question, and the honest answer is that 368 a month is real money but rarely a living, which is why the multi year view matters more than the monthly one.

200,000 at 4%

Yearly: 8,000. Monthly, about 655. Note that the larger balance at the lower rate out earns the smaller balance at the higher rate; balance and rate always work together, so compare accounts on the money, not the percentage.

Saving monthly from zero

Regular deposits behave differently, because each deposit only earns interest from the month it arrives. Saving 100 a month at 5% gives about 1,228 after one year: 1,200 you paid in, plus about 28 of interest. The calculator has a monthly deposit field that handles this alongside a starting balance.

Why the Monthly Figure Is Not Yearly Divided by Twelve

Dividing 4,500 by 12 gives 375, but the true first month figure at 4.5% AER is about 368. The advertised annual rate already includes the effect of compounding, so the equivalent monthly rate is slightly less than one twelfth of it. Twelve months of that slightly smaller rate, each applied to a slightly bigger balance, land exactly on the advertised 4.5%. Small difference, but it is why two calculators can disagree by a few units per month and both look plausible.

What Changes the Real World Answer

The rate you actually receive. Promotional rates often drop after a year, and easy access rates move with the central bank rate. An estimate is only as durable as the rate behind it.

Tax. Interest is usually quoted gross. Depending on where you live, some or all of it may be taxable once you pass an allowance, such as the personal savings allowance in the UK.

Withdrawals and timing. Interest accrues on the balance actually in the account. Money withdrawn mid year earns for the months it was there, not the full year.

Inflation. 4,500 of interest during a year of 3% inflation on a 100,000 balance leaves you about 1,500 better off in real purchasing power, not 4,500. Interest protects savings more often than it grows them.

Related Tools and Guides

• Interest earned calculator for the monthly, yearly, and multi year figures with optional deposits
• Savings goal calculator to work backwards from a target amount
• Compound interest calculator for custom compounding schedules
• How much to save each month for a goal