Savings Calculator - Free Compound Savings Calculator with Inflation Adjustment and Goal Planning
Basic Information
One-time starting deposit
Regular monthly contribution
Expected annual return (typical: 3-5%)
How long to save
Understanding Savings & Compound Interest
What is Compound Interest?
Compound interest is the process where interest earns interest. Unlike simple interest which is calculated only on your initial deposit, compound interest is calculated on both your principal and all accumulated interest from previous periods.
This creates exponential growth over time, often called the "eighth wonder of the world" by Einstein. The formula is: A = P(1 + r/n)^(nt), where:
- •A = Final amount
- •P = Principal (initial deposit)
- •r = Annual interest rate (decimal)
- •n = Compounding frequency per year
- •t = Time in years
The Power of Starting Early
Time is your greatest asset in savings. Due to compound interest, money saved early has exponentially more time to grow than money saved later.
Person A: $338,000
Person B: $331,000
Person A deposited 1/3 as much but ended with MORE money because they started 10 years earlier. That's the power of compound interest!
Setting Savings Goals
Successful savers set specific, measurable, achievable, relevant, and time-bound (SMART) goals. Here's how to structure your savings:
Emergency fund, vacation, car down payment. Use high-yield savings (4-5% APY). Need quick access.
Home down payment, wedding, education. Consider CDs or conservative investments (5-7% return). Some risk acceptable.
Retirement, children's college. Use 401k, IRA, or investment accounts (7-10% historical average). Higher risk acceptable for higher returns.
Understanding Inflation
Inflation erodes purchasing power over time. A dollar today buys less in the future. The US historical inflation rate averages 2-3% annually. This means $100 today = ~$82 purchasing power in 10 years at 2% inflation.
Real return = Nominal return - Inflation rate. If your savings earn 5% but inflation is 3%, your real return is only 2%. Always factor inflation into long-term planning.
Best Savings Accounts for Different Goals
Savings Rate Benchmarks
How much should you save? Here are expert-recommended percentages of gross income:
50% needs, 30% wants, 20% savings/debt
Impact of Monthly Savings Over Time
| Monthly Savings | 5 Years | 10 Years | 20 Years | 30 Years |
|---|---|---|---|---|
| $100/month | $6,801 | $15,528 | $41,103 | $83,573 |
| $250/month | $17,003 | $38,821 | $102,758 | $208,933 |
| $500/month | $34,006 | $77,641 | $205,515 | $417,866 |
| $1,000/month | $68,012 | $155,282 | $411,031 | $835,733 |
*Assumes 5% annual return compounded monthly, no initial deposit
Frequently Asked Questions
How much should I save per month?
Financial experts recommend saving at least 20% of your after-tax income. Following the 50/30/20 rule: 50% for needs, 30% for wants, and 20% for savings. For someone earning $4,000/month after taxes, that's $800/month in savings. Start with what you can afford and gradually increase. Emergency funds should cover 3-6 months of expenses. For retirement, aim to save 10-15% of gross income starting in your 20s, or more if starting later.
What is compound interest and how does it work?
Compound interest is interest calculated on both the initial principal and accumulated interest from previous periods. Unlike simple interest (calculated only on principal), compound interest allows your money to grow exponentially over time. For example, $10,000 at 5% annual compound interest becomes $12,763 after 5 years, versus $12,500 with simple interest. The formula is: A = P(1 + r/n)^(nt), where P is principal, r is annual rate, n is compounding frequency, and t is time in years.