Whether you’re considering opening a savings account, or already have one, making sense of interest rates can be a little confusing. While these rates can vary by bank or credit union, our online calculator can help you crunch the numbers.
Read more: Build your savings using Ally Bank’s buckets and boosters
What is a savings interest calculator?
Savings accounts allow you to earn a little interest over time, but calculating how much you can earn isn’t always an easy equation. Our savings interest calculator can help you figure out how much money you will earn in a year on the funds in your interest-bearing account.
How to use a savings interest calculator?
Enter your current balance and any annual percentage yield (APY) number, and you can compare how different APYs affect your annual earnings (assuming you don’t make any withdrawals over the course of that same year).
Terms to know
When calculating your potential return, it’s good to know the following concepts. They’ll help you understand how much you could save over time:
Interest rate: The percentage rate of return an account will yield after a certain period. For example, saving an initial principal of $2,000 with the interest rate of 1% per year would return $20 for a total of $2,020 at the end of the year.
Compound interest (compounding rate): Interest that is calculated based on your principal investment and the interest accumulated on it over time. Your initial deposit earns interest, then each time your interest compounds, you earn interest on the principal and on the interest you’ve already accrued.
Compounding period: The time between when interest was last compounded and when it will be compounded again. At Ally Bank, we compound interest daily, giving your savings an advantage over deposit accounts that compound interest only monthly, quarterly or annually.
APY: The total rate of return on an investment in one year. Your effective annual interest rate, including compounding interest, dictates how much you will earn on a savings account over one
Why is calculating savings interest important?
Understanding how your money grows over time and how different interest rates and compounding periods affect your savings can help you make more informed decisions to maximize your returns.
Consider this scenario: Let’s say you make a pre-tax yearly income of $50,000. If you were to take 2% of it and deposit it in an interest-earning account, you would make an initial deposit of $1,000. Continue setting aside this amount for four more years in an account with an APY of 1.00% and at the end of the fifth year you would end up with $5,153 (provided you don't withdraw or add funds during that time) with $153 earned in interest.
While saving 2% of your income may feel insignificant, over time, the returns you make from compound interest could significantly impact your net worth.
Comparing different savings account options
By analyzing different accounts and their features, you can choose the one that best meets your financial needs.
High yield savings accounts vs. traditional savings accounts
The main difference between these two types of accounts is the interest rate, with high-yield savings accounts typically offering a higher APY compared to traditional savings accounts.
With an Ally Bank Savings Account, you earn a competitive APY that’s consistently higher than the national average. Other key features include:
No monthly maintenance fees
Interest that compounds daily
FDIC protection for your Ally Bank deposits up to $250,000 per depositor for each qualifying account ownership category
No current account minimums to open or earn interest
Smart savings tools that help you organize and analyze your money
Tips for choosing the right account
When looking for an account to grow your savings, consider:
The interest rate offered: Look for accounts with a high APY to maximize your earnings. Online banks like Ally Bank generally offer higher APYs compared to traditional banks.
Any account fees or minimum balance requirements: Many banks offer accounts with low or no fees, but some charge monthly maintenance fees, withdrawal penalties or minimum balance fees.
The ease of access through ATMs or online banking: Do you prefer the convenience of online and mobile banking, or do you need access to physical branches? Keep in mind that online banks often offer extensive ATM access. With Ally Bank, you can use any of the 75,000+ Allpoint® and MoneyPass® ATMs in the U.S. for free.
Maximizing your savings potential
Your money can be working for you. With an Ally Bank Savings Account, you’re equipped with a platform and tools that can help your funds grow.
