Main specifications
Your savings goal
Initial saving balance
Length of your savings
Compounding method
Additional deposit
How much?
How often?
End of period
The lowest savings interest rate you need to obtain to reach your savings goal is 5.976%.
The total money deposited is $36,000.00.
Chart of balances

The savings interest rate calculator allows you to estimate the savings interest rates you need to reach a specific savings goal. Alternatively, you can use the tool as a saving account interest rate calculator to estimate the bank savings account interest rate.

Read on as we show how to calculate the interest rate on a savings account, and why are interest rates so low on savings accounts nowadays.

If you are interested in other aspects of savings, for example, you would like to find the monthly deposit to reach your savings goal, or find a final amount of your saving, you may find our savings calculator useful as well.

Why are interest rates so low on savings accounts?

If you keep some money in a savings account for a long time, you probably noticed that lately, the compound growth on your balance had dropped considerably. As for December 2020, the national average annual percentage yield (APY) was 0.06 percent in the US according to the Federal Deposit Insurance Corporation (FDIC).

There are two main reasons why are interest rates are so low on savings accounts:

  1. Falling interest rates on loans

When economic crises hit, policymakers do their best to mitigate the negative effect of falling incomes and aggregate demand on the unemployment rate. One possible way to boost spending, and so to stimulate GDP growth, is to lower lending rates through monetary easing, for example, by cutting policy rates or quantitative easing. Banks are profit-seeking businesses that gain significant profit from the spread between interest income on loans and interest expenses on deposits. When their income drops on the money they lend out due to falling interest rates, they try to reduce savings interests proportionately to keep their net interest margin high enough.

And the second reason why are savings rates are so low is...

  1. Low demand for deposits

The other possible reason why savings account interest rates are approaching zero is that banks balances are already flush with funds which might exceed their demand due to the higher saving ratio accompanied by low economic activity. Therefore, banks may not need to compete for new businesses and are able to keep savings rates low.

So what to do to get the best savings interest rates?

Besides the above, it's always a good idea to shop around for banks, especially among online banks, or to switch to a high-yield savings account which typically provides 20 to 25 times more interest than the national average of a standard savings accounts. Besides, if you can refrain from accessing your savings for a longer period, opening different types of accounts that apply a higher interest rate might be a good idea. Such an option is a certificate of deposit, or CD, which is a type of bank account that holds your deposit for a set term ranging between 1 to 60 months. CDs pay either fixed or variable interest, and you receive the interest plus the amount you deposited when the CD’s term is due.

How to calculate the interest rate on a savings account?

Computing savings interest rate for a year without additional deposit and compound interest takes just a little effort. In this case, you need to apply the following simple equation:

savings interest rate = (final savings - initial savings) / initial savings.

When we would like to estimate what is the interest rate on savings account covering multiple periods with compound interest and additional deposits, things become trickier. The fact is, at least according to mathematicians, that there is no clear-cut equation that can give a precise solution to find the interest rate in such a case. Traditional practice for such a task is to apply the iteration technique, which is a series of approximations which produce the right answer. In our case, the iteration is made by the following formula:

FV = PV * (1 + i)ⁿ + Pmt * ((1 + i)ⁿ⁻¹)


  • FV - Final savings (Future Value);
  • PV - Initial balance (Present Value); and
  • Pmt - Periodic deposit.

Since this procedure would require a considerable time and effort, we employ one of the most prevailing iterative techniques in our calculator, the Newton Method.

How to use the savings interest rate calculator?

Main specifications

  • Your savings goal - the balance that you would like to reach;
  • Initial saving balance - your current savings;
  • Length of your savings - the length of time you'd like to save money for;
  • Compounding method - the frequency interest compounds and is applied to your balance; and
  • Extra monthly payment (advanced mode) - with this option, you can increase the computed monthly payment by a given amount and see its effect on your results.

Additional deposit

  • How much? - the amount of saving you can put aside.
  • How often? - the regularity of additional deposit.
  • When? - the timing of additional deposit (beginning of the period or the end of period).


After setting all specifications, the results appear immediately. Most importantly, you can learn the savings interest rate needed to reach your specific savings goal. Moreover, if you set an additional deposit, we show you the sum of money you plan to put aside.

Also, you can follow your balances through a chart and table with the savings schedule for a better insight.


You should consider the savings interest rate calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive.

For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice.

Tibor Pal, PhD candidate