Plan your financial future with our easy-to-use savings calculator! Simply enter your Starting Balance, set the Time to Grow in years, and choose an Annual Interest Rate to estimate how your savings will grow. Customize your results by selecting a Compound Frequency (Monthly or Daily) and adding a Contribution Amount with a Contribution Frequency (Monthly or Yearly).
Click “Calculate” to see your Future Value instantly and take control of your savings journey today!
Example:
Imagine you start with $1,000, invest for 10 years at an annual interest rate of 5%, and choose monthly compounding. If you also contribute $50 per month, your savings over ten years will grow to $9,411.12 due to the power of compound interest. Try different values to see how your savings can increase over time!
Future Value:
Daily vs. Monthly Compounding in Savings Accounts
1. What’s the Difference?
- Daily Compounding: Interest is calculated and added to your balance every day. This means your money starts earning interest on the interest from the previous day, leading to slightly faster growth over time.
- Monthly Compounding: Interest is calculated and added to your balance once a month. Your balance grows more slowly compared to daily compounding because interest is applied less frequently.
2. Which One Is More Common?
- Daily compounding is more common, especially for high-yield savings accounts and online banks. Many banks advertise annual percentage yields (APY) based on daily compounding, as it maximizes returns.
- Monthly compounding is still used by some traditional banks, particularly in standard savings accounts.
3. How to Check Your Compounding Frequency?
- Bank Statements or Online Banking: Look for interest calculations in your account details. If interest is added daily, you have daily compounding. If it’s added once a month, it’s monthly compounding.
- Bank’s Website or Customer Service: Most banks specify their compounding frequency in the account terms. You can also call customer service and ask directly.
- APY vs. Interest Rate: If a bank advertises an APY (Annual Percentage Yield) instead of just an interest rate, it usually includes the effects of compounding. Daily compounding will have a slightly higher APY than monthly compounding for the same interest rate.
Which Is Better?
While daily compounding offers slightly higher returns, the difference is small unless you have a large balance over a long period. More important factors to consider are interest rate, fees, and withdrawal limits when choosing a savings account.
