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Total savings
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Regular deposits
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Total interest
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| YEAR | REGULAR DEPOSITS | INTEREST | TOTAL SAVINGS | TOTAL |
|---|---|---|---|---|
-- | -- | -- | -- | -- |
Up to
5.45%
p.a. for 4 months, then up to 4.00% p.a. variable
Rabobank High Interest Savings Account
Earn a bonus variable rate for the first 4 months on balances up to $250,000, with a high ongoing rate thereafter. No account keeping fees or min balance, with interest paid monthly. Intro rate for new customers only.
Up to
4.80%
p.a. variable with bonus interest, or 0.35% p.a. standard variable rate
Suncorp Bank Growth Saver Account
Earn bonus interest with no maximum balance or account keeping fees when you grow your savings by $200 or more each month (excluding interest) and make no more than one withdrawal.
How to use the compound interest calculator
Initial deposit
This is the starting amount of money you plan to deposit into savings. This will be the base amount the compound interest is calculated on.
Regular deposit
This is the amount of money you plan to deposit regularly.
Deposit frequency
How often you plan to make regular deposits into your savings account. If you have created a budget plan and put aside a regular amount to deposit into savings, you can select the relative frequency option here.
Compound frequency
How often interest is applied to your savings. Depending on the type of savings account (or term deposit) you are using, this will be monthly or annually.
Number of years
How long you plan to keep your initial deposit and regular deposits untouched in your savings account for.
Interest rate
This is the interest rate applied to your savings. Check the details of your savings account with your bank to understand how interest rates may change over time, or whether they are fixed for a set period.
Once you have entered the details about your estimated savings, you can click See My Savings to see how much you will gain through interest each year, including the total balance of your savings over the period.
Compound interest formula
The formula for compound interest on a single deposit is: a = d ((1 + ( r / n )) ^ (n * p))
Keep in mind that this is a simple formula, and when calculating the compounding interest on an amount which includes a frequent deposit, you’ll need to alter the way you calculate the interest.
This is because your compounding interest will be calculated at the beginning of the deposit period, where interest is added to the initial amount plus any deposits.
For example:
You deposit $10,000 for a fixed term and make regular deposits of $1,000 each month. The compounding interest is 5.00% and calculated annually, so for your first year, the amount of interest will only be $500 — where 5 per cent of 10,000 is 500. The total amount at the end of that year in your account will be 10,000 plus interest (500) plus your deposits (12,000), so the total amount will be $22,500.
For the next year, the 5.00% interest will be applied to the starting amount (22,500) so your interest will be $1,125. The total amount at the end of the second year will be the starting amount (22,500) plus the interest (1,125) plus the deposits (12,000), so your total amount at the end of the second year will be $35,625.
Compound interest example calculation
Let’s see how compound interest works in a simple example on a single deposit. We’ll use a $10,000 deposit earning 5% interest compounded monthly. You plan to leave the money untouched for 5 years.
If you want to quickly calculate the amount of interest you’ll earn on your savings deposit without creating your own spreadsheet with the above calculations, you can use our free compound interest calculator.
| Opening amount | 2 years | 5 years | 10 years |
|---|---|---|---|
$2,000 | $210 | $567 | $1,294 |
$5,000 | $525 | $1,418 | $3,238 |
$10,000 | $1,050 | $2,836 | $6,475 |
$15,000 | $1,575 | $4,254 | $9,714 |
$20,000 | $2,100 | $5,671 | $12,951 |
$25,000 | $2,626 | $7,090 | $16,191 |
$30,000 | $3,151 | $8,508 | $19,430 |
$40,000 | $4,201 | $11,344 | $25,905 |
$50,000 | $5,251 | $14,180 | $32,380 |
What is compound interest?
Compound interest is the process of increasing an amount of money at set periods by applying interest to a new, calculated amount each time. Think of compounding interest like a snowball, as you roll it down a hill, it gradually becomes bigger and bigger, with the total mass (amount of money) increasing its size more and more each time.
How does compound interest work?
The easiest way to understand how compound interest works is to look at it as an amount of money plus interest that is calculated on a previous amount of money plus interest. It is a cycle of financial growth where increasing amounts with the same interest rate applied will still continue to yield greater additional earnings each time.
Is compound interest good for saving money?
Compound interest is one of the best ways to save money if you are prepared to invest an amount over a significant period of time, and especially if you are able to deposit more money into the savings account regularly.
Does compound interest only apply to savings?
Compound interest can certainly help you increase the amount earned through savings and investments, however compound interest can also apply to debt. Understanding how compound interest works will allow you to better understand how debt and interest may affect your ability to comfortably repay an amount of debt over time.