How the calculator works
- Amount and rate: what you put in, and the APY the bank quotes.
- Type of account: a savings account adds interest monthly, and you can add money each month. A CD fixes the rate for the term.
- Tax: pick your federal tax bracket, or tax-free if the cash is in an account like a Roth IRA.
Interest on common balances
Interest in a year, before tax:
| Savings | 0.5% APY | 2% APY | 4% APY | 5% APY |
|---|---|---|---|---|
| $5,000 | $25 | $100 | $200 | $250 |
| $10,000 | $50 | $200 | $400 | $500 |
| $25,000 | $125 | $500 | $1,000 | $1,250 |
| $50,000 | $250 | $1,000 | $2,000 | $2,500 |
| $100,000 | $500 | $2,000 | $4,000 | $5,000 |
The rate matters more than most people expect: on $25,000, 0.5% APY earns $125 a year, while 4% earns $1,000.
What you keep after tax
$10,000 at 4% APY for a year, by federal tax bracket:
| Bracket | Federal tax | You keep | Rate after tax |
|---|---|---|---|
| Tax-free account | $0 | $400 | 4.00% |
| 10% | $40 | $360 | 3.60% |
| 12% | $48 | $352 | 3.52% |
| 22% | $88 | $312 | 3.12% |
| 24% | $96 | $304 | 3.04% |
| 32% | $128 | $272 | 2.72% |
| 35% | $140 | $260 | 2.60% |
| 37% | $148 | $252 | 2.52% |
Most states tax interest too, so you keep a little less. Interest earned inside a Roth IRA, or an HSA used for medical costs, isn’t taxed.
Saving every month
$10,000 to start and $200 a month at 4% APY, after federal tax in the 22% bracket:
| After | You put in | Interest after tax | Balance |
|---|---|---|---|
| 1 year | $12,400 | $346 | $12,746 |
| 2 years | $14,800 | $778 | $15,578 |
| 3 years | $17,200 | $1,298 | $18,498 |
| 5 years | $22,000 | $2,614 | $24,614 |
| 10 years | $34,000 | $7,655 | $41,655 |
Savings account, CD or Treasury bills?
- High-yield savings account: take money out at any time, but the rate can change. Good for an emergency fund.
- CD: the rate is fixed for the term, but taking money out early usually costs some interest.
- Money market account: a bank savings account that may come with checks or a debit card, insured like other deposits. A money market fund is different: it’s an investment, not a deposit.
- Treasury bills: short-term US government debt, from a few weeks to a year. The interest is free of state and local tax, which helps most in high-tax states.
Getting a better rate
- Compare APYs: online banks often pay several times more than the big branch banks.
- Small differences add up: 0.5% more on $10,000 is $50 a year before tax.
- Match the account to the goal: keep your emergency fund where you can reach it, and consider a CD for money you won’t need for a while.
For longer-term growth, try the compound interest calculator, and see what rising prices do to your savings with the inflation calculator.