How does this savings calculator work?
Savings accounts quote a yearly rate, but you pay in and earn interest month by month. This calculator converts the quoted rate into a monthly rate and then steps through every month: interest on the balance, then your deposit, or the other way round if you choose deposits at the start of the month. The first tab gives the balance at the end. The second tab turns the question round and gives the monthly saving needed to reach a target in the number of months you choose.
On the default inputs, $5,000 plus $300 a month at 4.5% AER grows to $26,328 after 60 months. You pay in $23,000 and interest adds $3,328, of which $1,049 arrives in the last 12 months alone.
AER, APY or nominal: which rate should go in?
Enter the rate the way your account states it. US banks disclose an annual percentage yield, APY, under Regulation DD (Truth in Savings). In the UK the matching figure is the AER, the annual equivalent rate. Both already include the effect of compounding over a year, so the calculator finds the monthly rate that compounds to exactly that figure: i = (1 + AER)^(1/12) - 1. For 4.5% that is 0.36748% a month, which works out at 4.410% if written as a nominal rate compounded monthly.
If you have a nominal rate instead, choose A nominal rate compounded monthly and the monthly rate is simply the rate divided by 12. The difference is worth knowing: entering 4.5% as nominal ends $74.21 higher on the default plan, because 4.5% nominal compounded monthly is an AER of 4.594%. To convert between the two for other frequencies, the APY calculator does it in either direction.
How much do I need to save each month to reach a goal?
Take the target, subtract what the starting balance will grow to on its own, and divide by the growth of $1 saved every month:
monthly saving = (target - start x (1 + i)^n) / (((1 + i)^n - 1) / i)
For $25,000 in 60 months, starting from $5,000 at 4.5% AER: the $5,000 grows to $6,230.91, leaving $18,769.09 to build. Each $1 saved at the end of every month grows to 66.9918, so the monthly saving is $280.17. Over the 60 months you pay in $21,810.21 and interest supplies $3,189.79. If the starting balance would reach the target on its own, the calculator says so and the monthly saving is zero.
Saving at the start or the end of the month
A deposit made on the first day of the month earns a month of interest before the month ends; one made on the last day earns none until the next month. Paying the $300 at the start of each month lifts the default 60-month balance from $26,328.44 to $26,402.29, a difference of $73.85. On the goal tab, saving at the start of each month brings the required amount down from $280.17 to $279.14.
The gap is small over five years at this rate and grows with the rate, the deposit and the number of months. Pick whichever matches when your pay arrives and the transfer goes out.
Worked examples in pounds, euros and dirhams
Every currency uses the same monthly arithmetic, and no amount is converted. The rates below are illustrations, not offers from any provider.
| Plan | Inputs | Result |
|---|---|---|
| Pounds, regular saving | £2,000 plus £250 a month, 4% AER, 36 months | £11,785.00, of which £785.00 is interest |
| Pounds, goal | £15,000 in 36 months from £2,000 at 4% AER | £334.29 a month |
| Euros, from nothing | €200 a month, 3% AER, 120 months | €27,889.60 from €24,000 paid in |
| Dirhams, goal | AED 100,000 in 48 months from AED 10,000 at 4% | AED 1,701.86 a month |
In the euro plan, interest adds €3,889.60, about 16% on top of the money paid in, because the early deposits have up to ten years to grow. Choose a currency in the selector and the defaults resize to round amounts in it.
How do the rate, the deposit and the time change the result?
Over 60 months the rate matters less than the amount you put in. On the default plan:
| Rate (AER) | Balance after 60 months | Monthly saving for $25,000 |
|---|---|---|
| 3.5% | $25,551.07 | $291.57 |
| 4.5% | $26,328.44 | $280.17 |
| 5.5% | $27,128.32 | $269.00 |
| 6.5% | $27,951.24 | $258.04 |
Each extra point of rate adds between $777 and $823 over five years. Adding $50 to the monthly deposit adds $3,000 of your own money plus its interest. Time works on both: $300 a month from nothing at 4.5% reaches $20,097.53 after 60 months, and starting with $5,000 instead brings the $25,000 goal within reach in month 57.
How do you work out monthly savings in Excel or Google Sheets?
Microsoft documents the PMT function as PMT(rate, nper, pv, [fv], [type]), where fv is a cash balance you want to reach after the last payment and type is 0 or 1 for when payments are due. Its own help page uses PMT to find the amount to save each month for a target. Keep the units consistent: a monthly rate and a number of months.
For the default goal, convert the AER to a monthly rate inside the formula: =PMT((1+4.5%)^(1/12)-1, 60, -5000, 25000) returns -280.17, the minus sign marking money paid in. Setting type to 1 gives the start-of-month figure, -279.14. For the balance on the first tab, the same rate goes into =FV(rate, 60, -300, -5000), which returns 26,328.44.
Common savings mistakes
- Dividing an AER by 12. 4.5% / 12 = 0.375% a month compounds to 4.594%, not 4.5%. Choose the matching rate type.
- Assuming the rate holds. Variable savings rates move, and introductory or bonus rates can end after a set period.
- Ignoring tax on interest. Interest can be taxable where you live, which lowers what you keep.
- Forgetting deposit limits. Regular saver accounts can cap the monthly deposit or the term.
- Leaving out inflation. If prices rise, $26,328 in five years will buy less than the same sum buys today.
What this calculator leaves out
The rate stays fixed for the whole period, interest is added monthly and every deposit is the same. The calculator does not include tax on interest, account fees, withdrawals, bonus rates that end, or caps on deposits. It does not adjust for inflation; the real return calculator takes inflation out of a rate. For a single sum with a different compounding frequency or yearly deposits, use the compound interest calculator, and for a fixed-term deposit with an early withdrawal penalty, the CD calculator.
Glossary
AER (annual equivalent rate): the UK name for the yearly rate including compounding. APY (annual percentage yield): the US name for the same idea. Nominal rate: a yearly rate before compounding. Monthly rate: the rate applied each month, here (1 + AER)^(1/12) - 1. Starting balance: money already saved on day one. Savings goal: the balance you want at the end. Schedule: the month-by-month or year-by-year record of deposits, interest and balance.
Frequently asked questions
How much will I have if I save $300 a month for 5 years?
At 4.5% AER with no starting balance, $300 a month for 60 months grows to $20,097.53, of which $18,000 is your own money. Starting with $5,000 as well, the balance reaches $26,328.44.
How much do I need to save each month to reach $25,000?
From a $5,000 start at 4.5% AER, $280.17 a month for 60 months reaches $25,000. With no starting balance you would need more, and a longer period or higher rate needs less.
How is interest calculated on a savings account with monthly deposits?
Each month interest is added on the balance at the monthly rate, then the deposit is added. With an AER, the monthly rate is (1 + AER)^(1/12) - 1, so twelve months compound to exactly the quoted AER.
Should I enter the AER or the gross rate?
Enter whichever your account shows and choose the matching option. AER and APY already include compounding; a nominal or gross rate compounded monthly does not. Mixing them up changes the five-year default balance by about $74.
Does saving at the start of the month make a difference?
Yes, a little. Each deposit earns one more month of interest. On $5,000 plus $300 a month at 4.5% AER for 60 months, saving at the start ends $73.85 higher.
How long will it take to reach my savings goal?
Try different month counts on the first tab until the balance passes your goal. From $5,000 plus $300 a month at 4.5% AER, $25,000 is reached in month 57.
What is the formula for monthly savings toward a goal?
Monthly saving = (target - start x (1 + i)^n) / (((1 + i)^n - 1) / i), where i is the monthly rate and n the number of months. Multiply the bottom line by (1 + i) for deposits at the start of each month.
Can I use the savings calculator in pounds, euros or dirhams?
Yes. Choose GBP, EUR, AED or any of 24 currencies; amounts are formatted for it and never converted. £2,000 plus £250 a month at 4% AER for 36 months reaches £11,785.00.
Does the savings calculator include tax or inflation?
No. Interest is shown before any tax, and amounts are in money of the day, not today's prices. The real return calculator can take inflation out of the rate first.
Courses at NIFM Academy
All NIFM Academy courses
The full NIFM Academy catalogue: ACCA exam preparation and stock market, forex and crypto trading courses.
See what the course coversFree course videos
Free course videos from NIFM Academy that you can watch before choosing a course.
See what the course coversETF Exchange Traded Funds Investing and Trading Course
Introduction to exchange-traded funds, covering how ETFs combine stock and mutual fund features and how to use them for portfolio construction.
See what the course coversSources and review
Last reviewed 14 November 2026 by the NIFM Academy editorial team. Next review by 14 November 2027.
- Savings annuity formulas, FV = S(1 + i)^n + D((1 + i)^n - 1) / i and its rearrangement for the monthly deposit, with i = (1 + AER)^(1/12) - 1, reproduced in the working under every result. Checked 14 November 2026.
- Regulation DD (Truth in Savings), 12 CFR part 1030, section 1030.2 defines the annual percentage yield as a rate reflecting the total interest paid on an account, based on the interest rate and the frequency of compounding for a 365-day period; read on the Consumer Financial Protection Bureau site. Checked 14 November 2026.
- Microsoft Support, PMT function, PMT(rate, nper, pv, [fv], [type]); fv is a cash balance you want to attain after the last payment; type 0 or 1 sets when payments are due; keep rate and nper in consistent units. Checked 14 November 2026.