How To Use Our Calculator
To calculate the amount of interest you will earn on your savings, use the calculator below. Input how much you want to save. Enter the interest rate you are getting on your savings account. The calculator will then automatically calculate your yearly interest and total interest after 1 year.
Understanding Interest Rates
Interest rates play a crucial role in managing your savings and investments. They determine how much you will earn on your savings account or investment, or how much you would have to pay back for a loan. It’s a percentage of the principal amount and usually accrued over a period (typically annually).
Impact Of Interest Rates On Savings
The interest rate offered by your bank or financial institution can significantly impact your savings over time. The higher the interest rate, the more money you’ll accumulate in your savings account. Over time, your savings will also earn interest, which results in compounding – earning interest on your interest.
The Difference Between Simple And Compound Interest
Simple interest is calculated only on the initial amount (principal) that you deposited. On the other hand, compound interest is calculated on the initial principal and also on the accumulated interest of previous periods. Thus, a savings account that offers compound interest grows faster than one with simple interest.
How Are Interest Rates Determined?
Interest rates are largely determined by the state of the economy. The Bank Of England often adjusts interest rates to control inflation and stabilize the economy. Rates can also vary between different banks and financial institutions. You can check out our guide on the best savings accounts in the UK to find the best rates.
Variable vs Fixed Interest Rates
A fixed interest rate remains the same for a specified period, while a variable or floating interest rate can change over the life of your savings or loan. Fixed rates provide certainty, while variable rates provide an opportunity to benefit from falling market interest rates.
The Effect Of Inflation On Interest Rates
Inflation can erode the purchasing power of your savings. If the inflation rate is higher than your savings interest rate, the real value of your savings could decrease over time. Therefore, it’s crucial to consider the inflation rate when looking at the interest rate on your savings account.
About our calculator
Our borrowing / savings calculator is designed for illustrative and general reference purposes only. For more detailed and specific information we recommend using the Money Advice Service loan calculator and savings calculator.
