Fact checked
The ability to earn interest is a key benefit to any savings account, so when you’ve found a high rate, you’ll want to estimate how much you can earn to reach your savings goal.
Luckily, you don’t have to use messy and complicated mathematical formulas if you don’t want to. Learn how Savvy’s hassle-free savings calculators can estimate your interest earnings and give you the best path toward achieving your goal. Start comparing your options today.
Interest rewards you for keeping your funds in a savings account. You’re essentially lending your financial institution money every time you deposit money into your savings account. They use this money to provide home and personal loans to customers or finance to businesses. In return, they pay you interest at a percentage determined by your institution. This interest is usually compounded daily, meaning you get a return on the money you’ve deposited plus the interest you’ve already accumulated.
If you’re wondering how to calculate interest on savings accounts, banks use the following process:
The formula of this would be:
Final balance = principal x (1 + (interest rate ÷ compounding frequency)) time frame
As an example, if you deposited $7,500 in a savings account earning 2.5% p.a. compounded monthly over 10 years, your formula would look like this:
$7,500 x (1+ (0.025 ÷ 12)) 120 = $9,627.69
$9,627.69 – $7,500 = $2,172.69 total interest
If you want to simplify the process and avoid complex formulas, though, you can use Savvy’s compound interest calculator to estimate how much you’d earn on a daily, monthly or annual basis.
Savings accounts have many factors that can impact how much interest you earn. You can easily compare these factors with Savvy to help you get the biggest bang for your buck. Variables include:
Interest rate
Comparing top interest rates is the best way to choose a savings account if you can meet all the conditions to achieve it. Having a high interest rate will allow your balance to grow faster, speeding up the achievement of your savings target.
Bonus interest
Many institutions make higher interest rates subject to you meeting some account requirements, such as a mandatory minimum balance or a certain number of deposits or amount deposited each month. This is common across online savings accounts and can extend to not making any withdrawals for the month. If you can’t meet the requirements, your interest will be calculated at your base rate. Comparing with Savvy will ensure you find an account with affordable conditions you can comfortably meet.
Introductory rates
Banks also offer ‘introductory’ rates to new account holders, offering a short period of high interest, typically for around four to six months, before the account reverts to a much-lower base rate. When you’re comparing, ensure you pay close attention to the base rate on these accounts. This will be the percentage your interest is calculated at once your honeymoon period ends.
Deposits
Frequent contributions into your savings account can boost the interest you earn on your nest egg. In most cases, interest is calculated daily, so making weekly or fortnightly deposits will accumulate more interest than if you were making monthly payments. You can use Savvy’s goal calculator to work out how much you need to deposit to reach your savings goal.
Balance
The larger your nest egg, the more interest you’ll earn. If you have a high interest savings account, it can be a good idea to consolidate your accounts into the one savings pool to boost your interest. It’s also worth considering an account which locks your money away if you’re prone to dipping into your savings, which will help protect your balance.
Time period
How much interest you earn depends on how long you save. If you’re in it for the long haul, such as if you’re saving for a home deposit, you’ll end up accruing more interest. For example, if you had an $80,000 savings goal and opened an account with $10,000 at 2.5% p.a., depositing $1,000 monthly, you’d reach your goal in five years and five months. You can use Savvy’s handy savings goal calculator to work out how long you have to save to reach your goal.
Fees
Check what fees savings accounts have when comparing with Savvy. Many are fee-free, but some may have monthly admin fees (up to $5) or paper statement charges (up to $2.50) which seem minuscule, but can add up over time and potentially eat into the interest you earn.
Are you looking to grow your savings? Compare a wide range of savings accounts with Savvy so you find the best deal in Australia and the highest interest rate to help grow your savings.
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Disclaimer: Savvy is not advising or recommending any particular product to you. We provide general information on products for the purposes of comparison, but your personal situation or goals are not considered here. Although we try to make our comparisons as thorough as possible, we do not have information on all products on the market on our site.
You should always consult a given offer's PDS or further documentation in the process of deciding on which loan to choose, as well as seeking independent, professional advice. If you decide to apply with one of the lenders listed above via our website, you will not be dealing with Savvy; any applications or enquiries will be conducted directly with the lender offering that product.
Use our savings calculator to help you calculate how much you could save over a set timeframe based on different deposit sizes and frequencies.
Your savings can put in work for you. Crunch the numbers to see how much interest you could earn on top of your interest by compounding daily, monthly and annually.
It's crucial to have a clear idea of your monthly household budget to see where your money is going and where it could potentially be better spent.
If you're applying for a loan or need to know what your salary is for your tax return, you can use our annualisation calculator to work out what you'll earn this financial year.
Setting savings goals is important. With this tool, you can work out how much you'll need to deposit to reach your financial aims over a set timeframe.
Just as important as knowing how much to deposit is working out how long it'll take to reach your goals. This savings goal calculator can help you do just that.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
