The formula
With an APY of a and a monthly deposit D made at the end of each month, the monthly growth rate is m = (1 + a)1/12 − 1 and each month Balance = Balance × (1 + m) + D. With no deposits this simplifies to Balance = Start × (1 + APY)years.
Example: $10,000 plus $500 a month at 4.25% APY
| Year | Balance | Total deposited | Interest earned |
|---|
| 1 | $16,541.00 | $16,000.00 | $541.00 |
| 2 | $23,359.99 | $22,000.00 | $1,359.99 |
| 3 | $30,468.78 | $28,000.00 | $2,468.78 |
| 4 | $37,879.70 | $34,000.00 | $3,879.70 |
| 5 | $45,605.59 | $40,000.00 | $5,605.59 |
What the APY is worth on $10,000 over 5 years (no deposits)
| APY | Interest in year 1 | Balance after 5 years | Interest over 5 years |
|---|
| 0.5% | $50.00 | $10,252.51 | $252.51 |
| 2% | $200.00 | $11,040.81 | $1,040.81 |
| 3.5% | $350.00 | $11,876.86 | $1,876.86 |
| 4.25% | $425.00 | $12,313.47 | $2,313.47 |
| 5% | $500.00 | $12,762.82 | $2,762.82 |
If your bank quotes an interest rate rather than an APY, convert it first with the APR to APY calculator. To lock in a rate for a set term, compare with the CD calculator.
Frequently asked questions
How is interest on a savings account calculated?
Banks quote savings and money market accounts by APY, which already includes compounding. Over a year, a balance B with no deposits grows to B × (1 + APY). Monthly, it grows by (1 + APY)^(1/12) − 1, about 0.347% a month at 4.25% APY.
How much interest does $10,000 earn in a high-yield savings account?
At 4.25% APY, $10,000 earns $425 in a year, or roughly $35 a month. At a 0.5% rate it would earn only $50 a year.
Is a money market account the same as a high-yield savings account?
They grow the same way, by APY, so this calculator works for both. A money market account may add checks or a debit card and sometimes needs a higher minimum balance; a high-yield savings account is usually online-only with no minimum.
Can the APY on a high-yield savings account change?
Yes. Savings and money market rates are variable and usually move with the central bank rate. If you want a rate locked for a fixed term, a CD does that, at the cost of an early-withdrawal penalty.
Is my money safe in a high-yield savings account?
At an FDIC-insured US bank (or NCUA-insured credit union), deposits are insured up to $250,000 per depositor, per bank, per ownership category. Money market accounts at banks are covered the same way; money market funds at brokers are not bank deposits.
Is savings interest taxable?
In the US, interest from savings and money market accounts is taxed as ordinary income in the year it is paid, and banks send a Form 1099-INT when it is $10 or more.