Savings calculator
A projection at a constant rate. Real savings rates move, and the figure in today’s money is the one that tells you what the pot will actually buy.
Savings grow from three things: what you start with, what you add, and the rate compounding on both. Five thousand plus 400 a month at 4.5% for ten years reaches about 68,314: of which 53,000 is money you put in and 15,314 is interest.
How to project your savings
For most savers over most timeframes, the monthly contribution matters more than the rate. On the defaults above, doubling the $400 to $800 adds $60,479.23 over ten years, while adding a whole percentage point to the rate adds $4,144.22. One of those is within your control and the other is not. Rate only overtakes contribution once the balance is large relative to what you are adding, so time spent rate-chasing in the first decade is usually better spent on the standing order. Even a $50 increase is worth $7,559.91 here, most of it being the extra $6,000 paid in.
Read the two bottom rows together, and carefully
The default run ends at $68,314.19 nominal and $53,366.94 in today’s money, against $53,000 paid in. Setting those last two side by side suggests ten years of saving gained $366.94 in real terms, and that comparison is unfair to the saver. The $53,000 was not paid in today; it went in a little at a time across a decade, in dollars that were themselves worth more when they were paid. Deflate each contribution to its own date and the money paid in is worth $47,489.12 in today’s terms, so the genuine real gain is $5,877.81. Nominal interest of $15,314.19, real gain of $5,877.81: inflation took roughly 62% of the return, and neither row on its own says so.
Cash and invested money are different assumptions, not different optimism
A rate is not a preference. An easy-access account pays whatever it pays and can change it next month; a diversified portfolio has no rate at all, only a distribution of outcomes with a long-run average. Entering a stock-market average return into a page that grows the balance smoothly every month gives an answer that could not be relied on for a goal with a date attached, and a goal with a date is the usual reason someone is on this page. For money needed within about five years the defensible input is the cash rate.
What people use it for
- Planning toward a deposit or a large purchase
- Comparing a cash account against an invested one
- Seeing what an extra 50 a month does over a decade
- Checking a savings goal is achievable in the time available
- Separating the real gain from the nominal interest figure
Questions
$5,000 plus $400 a month at 4.5% for ten years reaches $68,314.19, of which $53,000 is money you put in and $15,314.19 is interest.
It takes the same run to $75,874.10, up $7,559.91. Six thousand of that is the extra contributions and $1,559.91 is the interest they earned.
For the first decade or so, saving more. Doubling the contribution here adds $60,479.23; adding a percentage point to the rate adds $4,144.22.
Rarely. Monthly against yearly compounding at 5% differs by about 0.12 percentage points of effective rate, and on the defaults here the whole ten-year gap is $359.07.
Whatever your account actually pays for cash. For invested money, a long-run real return of 4 to 5% after inflation is a common planning assumption, and it is an assumption rather than a rate.
Because $100,000 in twenty years buys what about $61,027 buys today at 2.5% inflation. The today’s-money row is the one to plan against.
No, and that subtraction is the trap. Comparing the today’s-money figure against the nominal contributions treats a decade of payments as though they were all made today. Deflating each one to its own date puts the real gain at $5,877.81.
1.951% a year: 4.5% nominal against 2.5% inflation, divided rather than subtracted. Subtracting gives 2%, which is close enough at these levels and drifts as rates rise.
Nominal, with an inflation figure beside it, and then read the today’s-money row. Entering a rate that is already net of inflation while leaving the inflation field set deflates the answer twice.
Either, and the difference is entirely in the rate you enter. The arithmetic cannot tell whether the rate is contractual or hoped for.
Then use the rate a cash account actually pays. A smooth monthly growth curve is a poor model of a short holding in anything volatile, and the goal has a date.
No. Interest in a taxable account is taxed as it is earned, so the effective rate is lower than the one entered unless the account is sheltered.
Indirectly. Adjust the monthly figure until the final balance reaches your target, then check the today’s-money row, because a target set in current prices needs the larger nominal number to meet it.