CALCSLIP

Savings interest calculator

What a deposit or a monthly savings plan pays at maturity, before and after tax.

Account
$
% a year
months
Interest
%

0 for a tax-free account. Korea withholds 15.4%.

Result

Amount at maturity
$6,162.50
Total paid in
$6,000.00
Interest before tax
$162.50
Interest after tax
$162.50
Yearly return on the money in, after tax
5%

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How this was calculated

  1. Monthly rate

    r ÷ 12

    5% ÷ 12 = 0.00416667

  2. Interest

    Interest = A × r ÷ 12 × n(n + 1) ÷ 2

    $500.00 × 0.00416667 × 78 = $162.50

  3. At maturity

    Paid in + interest − tax

    $6,000.00 + $162.50 − $0.00 = $6,162.50

What this calculation assumes

  • Monthly savings are paid at the start of each month, as banks count them: the first payment earns interest for the whole term and the last for one month.
  • Simple interest is paid on what you put in; compounded monthly adds each month's interest to the balance.
  • The rate is fixed for the term. Banks round tax and interest to the unit of currency, so their figures can differ by a few units.

Estimates for information only. They are not financial advice, a loan offer or a guarantee of any return, rate or approval. Lenders and providers calculate with their own terms; check yours before you decide.

In short

A deposit earns P × r ÷ 12 × n in simple interest; a monthly savings plan earns A × r ÷ 12 × n(n + 1) ÷ 2, because later payments are in for less time. $500 a month for 12 months at 5% earns $162.50, and a $10,000 deposit at 5% compounded monthly earns $511.62 in a year, before any tax on interest.

A lump sum or a monthly plan

A deposit (a fixed deposit, term deposit or CD) puts one amount away for the whole term, so all of it earns interest every month. A monthly savings plan adds money as it goes: the first payment earns interest for the full term and the last for one month, so on average the money is invested for only about half the term.

That is why a 5% savings plan does not pay 5% of everything you put in. $500 a month for 12 months at 5% simple interest earns $162.50 on $6,000 paid in, while a $10,000 deposit at 5% compounded monthly earns $511.62 in a year.

The formulas

Deposit: P × r ÷ 12 × n Monthly plan: A × r ÷ 12 × n(n + 1) ÷ 2

P is the deposit, A the monthly payment, r the yearly rate and n the number of months. With monthly compounding the deposit grows to P × (1 + r/12)^n, and each monthly payment k grows by (1 + r/12)^k.

Tax on interest is taken from the interest, not the balance. In South Korea banks withhold 15.4% (14% income tax plus 1.4% local tax); some accounts are tax-favored or tax-free, and in many countries interest is taxed later through your return instead.

Questions people ask

Why does my savings plan pay less than the advertised rate?

The rate applies to the balance, and a monthly plan's balance builds up from zero. On average the money is in the account for about half the term, so the interest is roughly half of rate × total paid in.

Is simple or monthly compounding what banks use?

Most fixed deposits and savings plans quote simple interest paid at maturity; some pay monthly and compound it. Pick the one in your account terms; the difference over a year is small.

Is interest paid before or after tax?

The calculator shows both. Interest before tax is what the account earns; interest after tax is what you keep once the tax on interest you enter is taken off.