Assumptions
- Monthly plans assume a deposit at the start of each month; lump sums start on day one. Day-count conventions used by banks can shift the interest slightly.
- Tax uses the rate you enter and is rounded down to the smallest currency unit. Nothing about brackets or allowances is assumed.
- Bonus-rate conditions, early-withdrawal penalties and post-maturity rates are not modelled.
- Inputs stay in your browser and are never stored or transmitted.
How it is calculated
- Simple interest on a monthly plan pays each deposit for the months it remains, which works out as deposit × monthly rate × n(n+1)/2.
- Compound interest on a monthly plan uses the future value of an annuity due, with deposits at the start of each month.
- A lump sum earns amount × rate × years when simple, or amount × (1 + rate/12) raised to the number of months when compounded monthly.
- The tax rate you enter is applied to the interest, and what remains is divided by the deposits to give the effective annual return.
Examples
Common mistakes
- Check what the advertised rate requires. Headline rates often assume a direct deposit, a minimum balance or a first-time-customer bonus.
- Early withdrawal usually costs interest. Only commit money you can leave until maturity.
- Deposit insurance has limits. In the United States the FDIC covers $250,000 per depositor, per insured bank, per ownership category.
FAQ
Why does a 3% savings plan not pay 3%?
Because each monthly deposit only earns interest from the day it arrives. On a twelve-month plan the first deposit earns a full year of interest and the last earns one month, so the average money is invested for about six and a half months. Depositing $300 a month at 3% for a year puts in $3,600 and earns about $58 before tax, not $108. The effective annual return line makes that gap explicit.
What tax rate should I enter?
In the United States interest from a savings account or CD is ordinary income reported on Form 1099-INT, so use your marginal federal rate and add your state rate if your state taxes interest. For a Roth IRA, an HSA or a UK ISA, enter 0. The field is editable precisely because the answer differs by country and by person: Korea withholds a flat 15.4%, Spain taxes savings income from 19%.
How much does compounding actually add?
Less than most people expect over short terms. $10,000 at 3% for one year earns $300 simple and $304.16 compounded monthly, a difference of $4.16. Over ten years the same account earns $3,000 simple and $3,493 compounded, so the method matters much more as the term grows. Check whether your account compounds daily, monthly or annually before comparing two offers.
Why is the bank quoting a slightly different figure?
Banks accrue interest on actual days, and the first and last periods rarely line up with whole months. Some compound daily rather than monthly. Bonus rates that depend on a minimum balance or on not withdrawing also change the applied rate. Differences of a few dollars are expected.
What if I withdraw early?
A term deposit or CD normally charges an early-withdrawal penalty of several months of interest, and some accounts drop to a much lower rate instead. This calculator assumes you hold to maturity. After maturity many accounts roll over at a far lower rate, so set a reminder for the maturity date.
Is anything I type sent anywhere?
No. The whole calculation runs in this page and the amounts never leave your device.