How do you calculate your Interest Income
that the bank pays you on your savings account?
Many people simply take for granted that your bank pays you the proper interest on your savings account each month, without knowing how they actually calculated the interest. It is a simple calculation and you should check your bank regularly on their calculations, not just on your interest you receive on your savings account, but also on the interest you pay on your car loan, home loan, or any other consumer loan you may have outstanding. Here is the simple interest calculation. Principal in your account, multiplied by the rate of interest your bank is paying, divided by 360 days (number of days in a year), multiplied by the number of days in the month (or the actual period of your statement, which could be different than the actual days in a month).
How to Calculate Interest on my Savings Account?
If you have $10,000 in your account, and the bank is paying you 5% interest during the month of February, your interest for the month would be:
$10,000. x 5% = $500.
$500. / 360 days = $1.38 cents per day
$1.38 cents per day x 28 days in Feb = $38.89
(Your actual interest may vary by a few cents due to rounding.)
Calculating interest on your savings could never be easier with all the simple or complex calculators found on the net. Just the other day I found this Simple Savings Calculator (click on the link to make the simple savings calculator pop up) that can calculate how much interest you’d make on an initial amount with or without extra monthly payments. The best part about this calculator is that you can calculate compounded interest on a monthly, quarterly, semiannually or annually basis.
Step 1
Click on the calculator link above and enter the initial amount of money you have in your high interest savings account.
Step 2
If you wish to do so, enter a monthly deposit amount. Most individuals don’t have a set monthly deposit amount so it’s ok to leave it with zero. But just for education purposes, try adding different numbers to see how much you’d gain over a 10 year period. You’d be surprised what an extra $100 a month can do over a ten year span with a high interest rate.
Step 3
Enter the interest rate that you receive on your high interest savings account. Once again play around with numbers and see how a small percentage change can benefit you so much more. Don’t forget to add how the interest is compounded. Most banks will have the interest compounded yearly.
Step 4
Insert the length of time in which you’d like to have you money in the bank for. Once you’re finished adding all the necessary info, it’s time to calculate how much you would end up with. Remember that your interest rate will most likely not be the same for all 10 years so the data won’t be really accurate.
This site is a very helpful site for an ordinary person like me to understand how to startup and when to open savings account, thanks again.