Savings interest rate calculator: How much interest can you earn?
How much interest can you earn with a savings account? Our savings calculator helps you work out how much you will have in savings after a period of time based on the amount deposited initially, the interest rate you’ll be earning and how much you’ll be adding to your savings on a regular basis.
You can use our savings account comparison tables to see the highest interest rates currently available on Canstar’s database.
Please note: The calculations do not take into account all fees and charges. The results provided by this calculator are an estimate only, and should not be relied on for the purpose of making a decision in relation to a savings plan. Interest rates and other costs may change over time, affecting the total return from the product. Consider whether you need financial advice from a qualified adviser.
What is a savings calculator?
A savings calculator helps you work out how much money you will have in savings by a specified endpoint, based on how much you have to deposit into a savings account initially, how much you plan to add to it on a regular basis and what interest rate the account offers.
A savings interest calculator can be useful if you are working towards a goal, such as saving for a home deposit, planning a wedding or saving up to buy a car. You can tweak the regular savings amount to see what the impact will be if you put away a bit extra with each paycheck and, of course, what difference a higher interest rate could make.
How is interest calculated on savings?
Interest on savings accounts is typically calculated daily and paid monthly. This means the bank takes the closing balance of your savings account each day, multiplies it by the annual savings rate, then divides that number by 365 to arrive at the daily amount of interest earned. The daily interest earned amounts for the month are added together and that amount is deposited into the savings account each month.
In the next month, interest will be calculated on the new higher balance (i.e. including the interest earned in the previous month, assuming you leave it there). This is compound interest at work.
Some savings accounts offer stepped interest rates, meaning the bank pays different interest rates depending on how much money is in the account – for example, 1% p.a. on the first $10,000 and 1.5% on amounts above that. Where this is the case, the bank would calculate interest earned on your savings account at the rate that applies to the relevant portion of the balance and add the interest earned amounts together to give the total interest earned each month.
How much do I need to save each month?
The amount you’ll need to put into a savings account each month will depend on your goal, how much you have in savings to start off with and what interest rate you are earning. Say your aim is to have a $100,000 home deposit saved to buy a house three years from now, and you currently have $50,000 in savings. You would need to save an additional $1,263 each month (or around $583 each fortnight) to reach this goal, assuming your savings will earn a rate of 2% annually.
With a higher interest rate of 2.5% p.a., your monthly savings amount would need to be $1,232 each month (around $568 fortnightly).
What is a good savings account interest rate?
The savings rates offered by banks can fluctuate, often in line with the Reserve Bank of Australia’s official cash rate, and also vary from provider to provider. A good rate on a savings account is generally one that’s competitive relative to the other products in the market currently, but is also offered on a product that meets your needs.
For example, some savings accounts offer a higher interest rate if certain conditions are met, such as if no withdrawals are made in the month, a minimum amount is deposited into the account each month and/or the account balance grows in the month. In these instances, you may earn less interest if you withdraw money because you need it to pay a bill, don’t make a large deposit in the month, or the account balance is simply the same at the end of the month as it was at the start.
Another common condition that needs to be met to earn the top rate of interest on certain savings accounts is the customer needing to have a linked transaction account with the same bank and to make a certain number of card purchases via that account each month.
If your circumstances or saving and spending habits mean meeting the account’s conditions will be difficult, it may be best to look for an account that offers a high ‘base’ rate of interest that you will earn regardless of how you use the account.
Also bear in mind the amount of savings you have and whether stepped interest rates apply to the accounts you are considering, because that could mean you only earn the top rate of interest on a portion of your savings.
Some banks also offer higher interest rates to people in certain age groups (generally young customers), so it’s important to check the eligibility criteria if you spot a particularly attractive savings rate.
What other options are out there for earning interest on savings?
Other common options for earning a return on savings include term deposits and saving within superannuation.
Term deposits
Term deposits are similar to savings accounts in that they offer to pay an annual interest rate on the amount of money on deposit. The main difference is that funds saved in a term deposit are locked away and you can’t make withdrawals or deposit extra funds during the term.
Superannuation
It’s also possible to deposit funds into your superannuation account for the purpose of saving for the future. Most funds offer a ‘cash’ investment option designed to offer low risk and predictable returns, similar to what you might earn in a savings account. The big difference with a superannuation account is that the money saved is intended only to be used when you reach retirement. It’s generally not possible to withdraw funds before you retire.
That said, people saving for a home deposit may be able to save for that purpose within their super and access the funds when they buy a property.
Last updated: 12/07/2022
This content was reviewed by Sub Editor Jacqueline Belesky prior to publication as part of our fact-checking process.
Author: Sean Callery
Sean Callery is Deputy Editor at Canstar. He and his team cover just about every finance and lifestyle topic under the sun, from property and travel to the nitty-gritty of financial products like saving products, home loans, superannuation, and insurance. Armed with a Bachelor’s Degree in Journalism (Dublin City University) and a Masters Degree in Creative Advertising (Edinburgh Napier University), Sean has accumulated more than a decade of international experience in communications roles – in Australia, the UK and Ireland – across finance, banking, consumer and legal affairs, and more. His work as a journalist has featured in various publications and media outlets, including the Drogheda Independent, the Law Society of Scotland Journal and Ireland’s national broadcaster, Raidió Teilifís Éireann. Before joining Canstar, Sean oversaw content at Great Southern Bank (formerly CUA), one of Australia’s biggest member-owned financial institutions. Follow Sean on LinkedIn or on Twitter and Canstar on Facebook. Meet the Canstar Editorial Team.
