How To Calculate Savings Account Interest?

The expense of borrowing money is called interest. When you borrow money from someone, you are usually charged a percentage of the amount borrowed as a payment to the lender. Interest is set at a fixed rate, although it might vary depending on the circumstances and who you borrow from.

You get savings interest when you put money in a savings account. Compound interest is earned on savings accounts, which means that the interest you earn in one period is put into your account, and then you earn interest on that money in the next period. 

It’s crucial to understand how to calculate it to compare savings accounts from various banks and select one that works for you while growing your money. Gather the following information to determine the interest earned on your savings account:

  • The principal is your account balance when you lend money to the bank. “Principal,” or the amount in your account, is represented by the variable “p.”
  • The frequency with which the bank pays you interest is the interest payment frequency (yearly, monthly, or daily, for example). The variable “n” denotes the number of times interest is paid each year.
  • The account’s interest rate is the percentage it pays you. The variable “r” is given a decimal value.
  • The term is the loan’s full term in years, denoted by the letter “t.” For this variable, you’ll need to convert months to years. For example, a month is.083 years and 18 months are 1.5 years.

Once you have the data, you may use the basic or compound interest formulas to calculate the amount of interest you’ve earned on your savings. The interest you earn in one period, for example, is simple interest, which can be computed using the following formula:


Compounding interest is earned on a savings account, which means that the interest you earn is added to the balance, and then that amount collects interest, and so on. Use the following formula to compute compound interest:

A= P (1 + (r / n)^nt)

Where A is the total value in the future and n is the number of compounding periods.

With the equations mentioned above, anyone can calculate the interest and compound interest they’ll receive on their account, making it easier to choose the best bank according to their needs.

Visit our blog section to learn more about different ways to calculate saving account interest.

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