KLOORAHow to Calculate Interest on a Savings Account or FD
Published 1 November 2026 by Kloora Tools
Quick answer: final amount = principal x (1 + r / m) ^ (m x t), where r is the annual rate, m is how many times interest compounds per year and t is the years. 500,000 at 10 percent compounded monthly for 3 years grows to about 674,091. The free Compound Interest Calculator does this for any amount and term. The 10 percent rate is only an example.
How is savings account interest calculated?
Banks pay interest on your balance. Depending on the product, interest is calculated daily, monthly or quarterly on the balance, and paid out monthly, quarterly or yearly. When the interest is added to your balance, the next interest is earned on a bigger amount. That is compounding.
What is the compound interest formula?
A = P x (1 + r/m) ^ (m x t)
- A: final amount
- P: principal (starting amount)
- r: annual rate as a decimal (10 percent = 0.10)
- m: compounding periods per year (12 for monthly)
- t: years
Example: P = 500,000, r = 0.10, m = 12, t = 3. A = 500,000 x (1 + 0.10/12) ^ 36 = 674,091. Interest earned = 174,091.
Does monthly compounding earn more than yearly?
Yes, slightly. Compare the same 500,000 at 10 percent for 3 years:
| Compounding | Final amount | Interest |
|---|---|---|
| Yearly (m = 1) | 665,500 | 165,500 |
| Monthly (m = 12) | 674,091 | 174,091 |
The difference is about 8,591 over 3 years. Always check how often your bank compounds and pays the profit.
How do you calculate fixed deposit (FD) returns?
A fixed deposit locks money for a set term at a stated rate. Some FDs pay profit monthly to you, so there is no compounding on your side. Others reinvest it and pay all at maturity. Ask your bank which type it is. Use simple interest for monthly payout deposits: interest per year = principal x rate. For 500,000 at 10 percent that is 50,000 a year, or about 4,167 a month. See the Simple Interest Calculator.
What about tax and inflation?
Profit on savings can be taxed, and rules and rates change. Check the current rules with your bank or tax adviser before relying on a net figure. Inflation also reduces what your money can buy. If you earn 10 percent and inflation is 8 percent, your real gain is only about 2 percent. The Inflation Calculator shows how today's money loses value over time.
How long to double your money?
The rule of 72 gives a quick estimate: 72 divided by the annual rate in percent. At 10 percent, doubling takes about 7.2 years. Try the Rule of 72 Calculator.
How do you compare savings products?
- Compare the annual rate and how often it compounds.
- Check minimum balance, withdrawal limits and fees.
- Check whether profit is paid out or reinvested.
- Compare the after-tax result, using current rules.
- Look for early withdrawal penalties on FDs.
Try it now
Enter your own amount, rate and term in the Compound Interest Calculator and compare monthly and yearly options.
Frequently asked questions
How do I calculate interest on my savings account?
Use A = P x (1 + r/m) ^ (m x t), where m is how many times per year interest compounds.
How much is 500,000 worth after 3 years at 10 percent compounded monthly?
About 674,091, which is 174,091 of interest.
Is monthly compounding better than yearly?
Slightly. The same rate with monthly compounding earns a bit more than yearly compounding.
How is fixed deposit interest calculated?
It depends on whether profit is paid out or reinvested. Payout deposits use simple interest. Reinvested deposits use compound interest.
How does inflation affect my savings?
Real return is roughly the interest rate minus inflation. If inflation is higher than your rate, you lose buying power.
How long will it take to double my savings?
Use the rule of 72: divide 72 by your annual rate. At 10 percent it takes about 7.2 years.
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