The straightforward curiosity calculator computes the curiosity quantity and ending stability for financial savings. Calculate easy curiosity through the use of the formulation I = Prt. On this formulation, “I” equals the curiosity quantity, “P” equals principal (the beginning stability), “r” equals the rate of interest and “t” equals the variety of time durations.
You should use the straightforward curiosity calculator under to determine how a lot curiosity you may earn with completely different charges and time durations.
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The right way to calculate easy curiosity in a financial savings account manually
You calculate the straightforward curiosity earned in a financial savings account by multiplying the account stability by the rate of interest by the point interval the cash is within the account. Curiosity in a financial savings account is cash you earn, not cash you pay, so the upper the rate of interest, the extra you’ll be able to earn.
P = Principal quantity (the start stability).
r = Rate of interest (often per yr, expressed as a decimal).
t = Variety of time durations (typically one-year time durations).
Easy curiosity calculation examples
Instance 1. Say you’ve gotten a financial savings account with $10,000 that earns 5% curiosity per yr. Expressed as a decimal, the rate of interest is 0.05, so the formulation can be:
Curiosity = $10,000 * 0.05 * 1. The curiosity earned on this instance equals $500.
Instance 2. Now say you need to see how a lot easy curiosity you’ll earn in two years. The formulation can be:
Curiosity = $10,000 * 0.05 * 2. The straightforward curiosity earned on this instance equals $1,000.
What’s the distinction between easy curiosity and compound curiosity?
Consider easy curiosity as a snapshot of your earnings throughout a set time interval. In order for you a tough thought of what you’ll earn, you need to use the straightforward curiosity calculation. However in a financial savings account, your curiosity sometimes begins to earn curiosity over time as properly. This is called compound curiosity. If you wish to decide exactly how a lot curiosity you may earn in financial savings over time, you’ll need to contemplate the impact of compounding.
The financial savings fee your financial savings account exhibits you is commonly really the compound curiosity quantity, which is expressed as a proportion adopted by the phrases “annual proportion yield” or “APY.”
For instance, say you’ve gotten that very same $10,000 in a financial savings account that earns 5% APY, and you retain the cash within the account for 2 years. If the earnings are compounded month-to-month, you’ll obtain $1,049.41 in curiosity, versus the $1,000 with the straightforward curiosity calculation.
APYs for among the finest financial savings accounts are above 5% as of April 2024. However different accounts earn a lot much less (the nationwide common financial savings fee is simply 0.46%). To maximise your financial savings, select a financial savings account that earns a excessive yield. You’ll be able to then use our compound curiosity calculator, which considers compound curiosity, to see how a lot your financial savings stability may develop over time.