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How to Calculate Interest in a Savings Account
The simple interest formula is Interest = P * R * T.
Margarette Burnette is a NerdWallet authority on savings, who has been writing about bank accounts since before the Great Recession. Her work has been featured in The Associated Press, USA Today and other major newspapers. Before joining NerdWallet, Margarette was a freelance journalist with bylines in magazines such as Good Housekeeping, Black Enterprise and Parenting. She is based near Atlanta, Georgia.
Tony Armstrong leads the banking team at NerdWallet. He has covered personal finance for over a decade. Tony began his NerdWallet career as a writer and worked his way up to editor and then to head of content on the banking team. His writing has been featured by the Los Angeles Times, MarketWatch, Mashable, Nasdaq.com, USA Today and VentureBeat. Tony lives in Minneapolis, Minnesota.
Wealth psychology expert and coach Kathleen Burns Kingsbury, founder of KBK Wealth Connection and host of the Breaking Money Silence podcast, is an internationally published author and speaker. As an expert on financial psychology, Kathleen has appeared on television and her work has been featured in The New York Times, The Wall Street Journal, "PBS NewsHour," Money magazine, Today Money, Forbes and CNBC. Kathleen served as an adjunct faculty member at the McCallum Graduate School at Bentley University from 2009 to 2019 and currently teaches at Champlain College.
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When you earn interest in a savings account, the bank is paying you money to keep your cash deposited at that institution. Better yet, your money compounds, which means even your interest earns interest.
Figuring out how much you'll earn over time means calculating how much your money compounds.
How to calculate interest in a savings account
To calculate the simple interest you’ll earn in a savings account, multiply the account balance by the interest rate by the time period the money is in the account. Note that the interest in savings is money you earn, not money you pay.
Simple interest formula
The formula for calculating simple interest is: Interest = P * R * T.
P = Principal amount (the beginning balance).
R = Interest rate (usually per year, expressed as a decimal).
T = Number of time periods (generally one-year time periods). Say you have a savings account with $10,000 that earns 4% interest per year. Expressed as a decimal, the interest rate is 0.04, so the formula would be:
Interest = $10,000 * 0.04 * 1, which equals $400.
Interest rates in some of the best high-interest savings accounts are above 4%. Others earn much less. In fact, the national average savings rate is only 0.38%. You can use NerdWallet’s savings calculator to figure out how much interest you could earn with different rates and time periods.
Here’s another simple interest example: If a $10,000 deposit is in an account that earns only 0.15% interest per year, the interest rate would be expressed as 0.0015. In this case, the calculation would be:
Interest = $10,000 * 0.0015 * 1.
Interest = $15.
The interest rate formula is best for calculating roughly how much your money can earn based on the principal balance. To know precisely how much you could earn in a savings account over time, you’ll want to consider the effect of compounding.
Annual Percentage Yield (APY) is accurate as of June 17th, 2025. Start earning 2.50% APY, then qualify to earn 5.00% APY on your balance up to $5,000.00 and 2.50% APY on balances over $5,000 next month by 1) Receiving direct deposit(s) totaling $1,000 or more; and 2) Ending the month with a positive balance in all your Varo Accounts. No fees, no minimums required. Rates subject to change at any time.
This offer is only valid for a new Premium Savings Account (“PSA”). The Promotional Annual Percentage Yield (“Promotional APY”) will be automatically applied to the account, and will remain effective for 180 days (the “Promotion Period”), after which it will automatically revert to the Standard Annual Percentage Yield (“Standard APY”) without requiring any action from you. Accounts must be opened by 9/30/26 to qualify for the Promotional APY. No minimum balance required, and the offer may be withdrawn at any time. Excludes non-U.S. residents, and residents of any jurisdiction where this offer is not valid. Other restrictions may apply. Please visit etrade.com/premiumsavings for more information.
These cash accounts combine services and features similar to checking, savings and/or investment accounts in one product. Cash management accounts are typically offered by non-bank financial institutions.
The Base Annual Percentage Yield (APY) is 3.30% (from program banks) as of 1/30/26 and is subject to change. Eligible new clients can get a 0.75% APY boost over the base APY for 3 months on up to a $150k balance. The Direct Deposit Plus Investing Program from Wealthfront Advisers LLC and Wealthfront Brokerage LLC provides eligible clients a 0.25% APY increase above the base APY on eligible Cash Account balances. Wealthfront may change or end the program at any time and determine eligibility at its discretion. Terms apply. Full details at wealthfront.com/promo-terms. Cash Account offered by Wealthfront Brokerage LLC, Member FINRA/SIPC, and is not a bank. Base APY is representative, variable, and requires no minimum. Individual experiences and outcomes will differ. NerdWallet receives compensation from Wealthfront for referring clients through paid ads, which creates a conflict of interest; NerdWallet is not a client. Investing involves risks. Securities are not bank deposits, bank-guaranteed or FDIC-insured, and may lose value. Investment management and advisory services provided by Wealthfront Advisers LLC, an SEC-registered investment adviser.
Annual percentage yield (variable) is 3.25% as of 12/12/25, plus a 0.75% boost (“APY Boost”) on balances up to $1M for new clients with a qualifying deposit. $10 min deposit for base APY. Terms apply (betterment.com/boost); if the base APY changes, the Boosted APY will change. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. Learn More (https://www.betterment.com/cash-portfolio).
CDs (certificates of deposit) are a type of savings account with a fixed rate and term, and usually have higher interest rates than regular savings accounts.
As of 05/19/2026, the Annual Percentage Yield (APY) of the Certificates of Deposit is up to 4.05%. Your interest rate and APY may change at any time until funding is settled, and penalties may reduce earnings. Settlement date is when funds are received and posted to your account according to our Funds Availability policy, found in section 3 of the Morgan Stanley Private Bank Deposit Account Agreement. The APY is based on no withdrawal of credited interest and no redemption prior to the stated maturity date. Please visit etrade.com/ratesheet for information regarding the current interest rate, corresponding APY, and account terms.
Annual Percentage Yield (APY) is subject to change at any time without notice. Offer applies to personal non-IRA accounts only. Fees may reduce earnings. For CD accounts, a penalty may be imposed for early withdrawals. After maturity, if your CD rolls over, you will earn the offered rate of interest in effect at that time. Visit synchrony.com/banking for current rates, terms and account requirements. Member FDIC.
All Bread Savings APYs are accurate as of 05/21/2026. APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. To open a CD, a minimum of $1,500 is required and must be deposited in a single transaction. A penalty will be imposed for early withdrawals on CDs. At maturity, your CD will automatically renew and earn the base interest rate in effect at that time. Rates are compared against competitor rates published by NerdWallet.com and the institutions themselves as of 05/21/2026. NerdWallet.com obtains the data from the various banks that it tracks and its accuracy cannot be guaranteed.
Annual Percentage Yield (APY). APY may change at any time and fees may reduce earnings. Please visit etrade.com/ratesheet for more information. The $15 monthly account fee can be waived when you maintain an average monthly balance of at least $5,000 in the account on or after the end of the second calendar month from opening the account.
Savings account simple interest vs. compound interest
If you're earning interest in a savings account, that interest will also earn interest over time. That means your overall earnings will be a bit higher than the simple interest formula above suggests.
Say your account has earned $10 in interest. If you leave that extra bit of money in your account, it will also start earning money during each compounding period (many online savings accounts compound daily). The rate of compounded interest earned over a year is referred to as the annual percentage yield (APY). You'll typically see savings account rates expressed as an APY.
Nerdy Perspective
Why should someone lock in the highest savings rate possible?
Margarette Burnette
Banking Senior Writer
This question is easy — you earn more money with a higher rate. If you’re like me, you don’t want to sit around a year from now thinking about all the money you could have earned if you’d just taken the time to get the higher rate when you had the chance. If I were earning less than 1% APY on my savings, I’d move today to lock in a better yield.
This question is easy — you earn more money with a higher rate. If you’re like me, you don’t want to sit around a year from now thinking about all the money you could have earned if you’d just taken the time to get the higher rate when you had the chance. If I were earning less than 1% APY on my savings, I’d move today to lock in a better yield.
Margarette Burnette
Banking Senior Writer
Spencer Tierney
Banking Senior Writer
When I joined an online bank for its high-yield savings account and CDs, my annual interest earnings jumped from cents at my traditional bank to hundreds of dollars at the online bank. Think of a high savings rate as a way to maximize your short-term returns, separate from long-term investments where more growth is expected. If switching banks sounds exhausting, then see if you can just open a fee-free online savings account and keep your old bank. That's what I did.
When I joined an online bank for its high-yield savings account and CDs, my annual interest earnings jumped from cents at my traditional bank to hundreds of dollars at the online bank. Think of a high savings rate as a way to maximize your short-term returns, separate from long-term investments where more growth is expected. If switching banks sounds exhausting, then see if you can just open a fee-free online savings account and keep your old bank. That's what I did.
Spencer Tierney
Banking Senior Writer
Margarette Burnette
Banking Senior Writer
This question is easy — you earn more money with a higher rate. If you’re like me, you don’t want to sit around a year from now thinking about all the money you could have earned if you’d just taken the time to get the higher rate when you had the chance. If I were earning less than 1% APY on my savings, I’d move today to lock in a better yield.
This question is easy — you earn more money with a higher rate. If you’re like me, you don’t want to sit around a year from now thinking about all the money you could have earned if you’d just taken the time to get the higher rate when you had the chance. If I were earning less than 1% APY on my savings, I’d move today to lock in a better yield.
Margarette Burnette
Banking Senior Writer
Spencer Tierney
Banking Senior Writer
When I joined an online bank for its high-yield savings account and CDs, my annual interest earnings jumped from cents at my traditional bank to hundreds of dollars at the online bank. Think of a high savings rate as a way to maximize your short-term returns, separate from long-term investments where more growth is expected. If switching banks sounds exhausting, then see if you can just open a fee-free online savings account and keep your old bank. That's what I did.
When I joined an online bank for its high-yield savings account and CDs, my annual interest earnings jumped from cents at my traditional bank to hundreds of dollars at the online bank. Think of a high savings rate as a way to maximize your short-term returns, separate from long-term investments where more growth is expected. If switching banks sounds exhausting, then see if you can just open a fee-free online savings account and keep your old bank. That's what I did.
Spencer Tierney
Banking Senior Writer
Margarette Burnette
Banking Senior Writer
This question is easy — you earn more money with a higher rate. If you’re like me, you don’t want to sit around a year from now thinking about all the money you could have earned if you’d just taken the time to get the higher rate when you had the chance. If I were earning less than 1% APY on my savings, I’d move today to lock in a better yield.
This question is easy — you earn more money with a higher rate. If you’re like me, you don’t want to sit around a year from now thinking about all the money you could have earned if you’d just taken the time to get the higher rate when you had the chance. If I were earning less than 1% APY on my savings, I’d move today to lock in a better yield.
Margarette Burnette
Banking Senior Writer
Spencer Tierney
Banking Senior Writer
When I joined an online bank for its high-yield savings account and CDs, my annual interest earnings jumped from cents at my traditional bank to hundreds of dollars at the online bank. Think of a high savings rate as a way to maximize your short-term returns, separate from long-term investments where more growth is expected. If switching banks sounds exhausting, then see if you can just open a fee-free online savings account and keep your old bank. That's what I did.
When I joined an online bank for its high-yield savings account and CDs, my annual interest earnings jumped from cents at my traditional bank to hundreds of dollars at the online bank. Think of a high savings rate as a way to maximize your short-term returns, separate from long-term investments where more growth is expected. If switching banks sounds exhausting, then see if you can just open a fee-free online savings account and keep your old bank. That's what I did.
Spencer Tierney
Banking Senior Writer
What is a high-yield savings account?
A high-yield savings account, or HYSA, is a type of savings account that pays a much higher interest rate than a traditional savings account, allowing you to earn more internet on your money. As noted above, while the national average rate for savings accounts is only 0.38%, many high-yield accounts earn around 4%.
Putting your money in a high-yield account, instead of basic savings, can help you to grow your bank balance without much effort.
If interest is compounded daily, you’d earn about $2,214. Compare that with earning only simple interest and no compounding: With the simple interest formula (Interest = $10,000 x 0.04 x 5), you can see that your simple interest would be only $2,000.
With compounding, you get $2,214 instead of $2,000. It's additional money with no additional effort on your part. The higher the rate, the more your money will grow. And the more compounding periods there are, the more your money can grow as well.
Use NerdWallet’s compound interest calculator and select the compounding period (daily, monthly or annually) to determine how much you could earn in different scenarios. Or you could use the compound interest formula below to calculate it manually.
The compound interest formula The compound interest formula
Here is how to compute monthly compound interest for 12 months: Use the formula A=P(1+r/n)^nt, where:
A = Ending amount.
P = Principal amount (the beginning balance).
r = Interest rate (as a decimal).
n = Number of times interest is compounded in a specific time frame.
Compound interest is a good way to have your money work for you, but you can really boost your savings if you take the additional step of making regular savings deposits. More deposits mean faster growth.
In the example above, say you deposit an extra $100 a month after the initial $10,000. In five years, you would have deposited an extra $6,000 ($100 * 12 months a year * 5 years = $6,000). But when compounded daily at 4% APY, your balance grows to about $18,845.
You don’t need to have $10,000 to take advantage of compound interest
You can start small. Suppose you begin with a $20 savings balance and make savings deposits on a regular basis. For example, say you set aside some money from each paycheck and then deposit $40 each month into your savings account for a year.
After those 12 months, you would have deposited $480 ($40 * 12 months = $480), on top of the initial $20, for a total of $500. Continue doing that for five years, and you would have $2,420 in deposits ($480 * 5 years = $2,400, plus the original $20). But if that money is in a savings account that earns a 4% APY over the entire term, compounded daily, the account balance would be $2,676.82.
So your money would have earned you an extra $256.82. It’s worth noting that interest rates in savings accounts are variable and can change at any time. If you would like to deposit your money in an account with a fixed rate, consider a high-performing certificate of deposit.
How to earn more interest in a savings account
To earn more interest, you’ll need to put your money in an account with a strong yield. Many online banks tend to have savings accounts with above-average interest rates. Check out this list of the best savings accounts to see how they compare.
