# Simple Savings Calculator

## Simple Savings Calculator

A Simple Savings calculator can be used to calculate the maturity amount that shall be available to the individual wherein he has the options to invest, and he will choose wherein he can maximize his return.

#### Simple Savings Calculator

M = I * (1+r)n*F + i * ((1+r)n*F – 1 )/ r

Wherein,
• I is the initial amount invested.
• r is the rate of interest.
• n is the number of periods for which simple savings shall be made.
• F is the frequency of interest is paid
• i is the fixed amount invested at regular intervals.
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The formula is as per below:

Mathematically it can be calculated for one-time Simple Savings:

M = I * ( 1 + r/F )n*F

Secondly, if monthly simple savings is made, the calculation:

M = I * (1+r)n*F + i * ((1+r)n*F – 1 / r )

Wherein,

• M is the total amount at the end of the simple savings period
• I is the initial amount invested
• i is the fixed amount invested at regular intervals
• r is the rate of interest
• F is the frequency of interest is paid
• n is the number of periods for which simple savings shall be made.

There are a lot of banks and other that are competing in the market to attract deposits so that they can do more business, i.e., lending of the money to corporates or high net worth individuals. Some banks would pay a higher rate of interest if the deposits exceed certain threshold limits and are maintained in the account, or else, they will pay a standard rate of interest. Further, there could be a difference in frequencies of the interest payout; for example, the interest could be compounded and paid out quarterly, semi-annually, or annually depending upon the bank. Therefore, with this calculator, individuals would be able to determine which financial institution they should choose to invest their money by comparing the maturity amount or return earned on their principal amounts.

### How to Calculate Simple Savings?

One needs to follow the below steps in order to calculate the simple savings.

Step #1 – Determine what amount would be invested, whether it’s in lumpsum or there is a periodical investment as well, then the same should be considered in compare savings rates calculations.

Step #2 – Figure out the rate of interest that is available in options for the individual, and that would be earned or is expected to be earned on the simple savings.

Step #3 – Now, determine the period for which it shall be invested, and mostly those will be for the long term and will depend upon case to case.

Step #4 – Divide the rate of interest by the number of periods the interest or the Simple Savings interest is paid. For example, if the rate paid is 5% and it pays monthly, then the rate of interest would be 5%/12, which is 0.416%.

Step #5- Now use the formula that was discussed above in point 1) in case the Simple Savings is made lumpsum and use formula 2) in case the Simple Savings amount is made at regular intervals along with any initial amount for all the options available.

Step #6 – The resultant figure will be the maturity amount that would include the Simple Savings income as well and chose the one which has the highest payout in terms of interest.

You can download this Simple Savings Calculator Excel Template here – Simple Savings Calculator Excel Template

### Simple Savings Calculator Example

Mr. William is now an adult and is excited to open up his first savings account. He has searched for the financial institution, which provides a high rate of interest, but he is perplexed as he doesn’t get as which bank will be providing him the highest return. Below are the quotes that Mr. William has shortlisted.

He wants to invest \$1,500 in either one of the accounts, and he will invest the way the account is paying interest. For example, if the bank pays semi-annually, then the amount will be invested equally at the end of each period and will continue to do so for a period of 10 years.

Based on the given information, you are required to calculate the amount that he would be saving, and the interest earned on the same, and which Bank should he chose to invest in.

Solution:

We are given the below details:

BANK I

• I = Initial amount will be zero
• r = Rate of interest which is 3.00% and Quarterly it will be 3.00% / 4 which is 0.75%
• N = Frequency which is quarterly here; hence it will be 4
• n = number of years the Simple Savings to be made, which is 10 years here.
• i = It the regular amount to be invested, which is 1500 / 4 that s \$375

Now, we can use the below formula to calculate the maturity amount.

M = I * (1+r)n*F + i * ((1+r)n*F – 1 )/ r
• =0 * ( 1 + 0.75% )10 * 4 + 375 * ( ( 1 + 0.75%)10*4 – 1 / 0.75%)
• =17,417.43

Maturity amount will be 17,417.43

BANK II

• I = Initial amount will be zero
• r = Rate of interest which is 3.12% and Semi-annually it will be 3.12% / 2 which is 1.56%.
• N = Frequency which is Semi-annually here, hence it will be 2
• n = number of years the Simple Savings to be made, which is 10 years here.
• i = It the regular amount to be invested, which is 1500 / 2 that is \$750

Now, we can use the below formula to calculate the maturity amount.

M = I * (1+r)n*F + i * ((1+r)n*F – 1 / r )
• = 0 * ( 1 + 1.56% )10*2 + 750 * (( 1 + 1.56%)10*2 – 1) / 1.56%
• = \$17,445.58

Maturity value will be \$17,445.58

Compounded interest earned would be \$17,445.58 – (\$ 750 * 20 ) = \$2,445.58.

BANK III

• I = Initial amount will be zero
• r = Rate of interest, which is 3.15%, and Annually it will be 3.15% / 1, which is 3.15%
• N = Frequency which is Annually here, hence it will be 1
• n = number of years the Simple Savings to be made, which is 10 years here.
• i = It the regular amount to be invested, which is 1500 / 1 that s \$1,500

Now, we can use the below formula to calculate the maturity amount.

M = I * (1+r)n*F + i * ((1+r)n*F – 1 )/ r
• = 0 * ( 1 + 3.15% )10*1 + 1500 * (( 1 + 3.15%)10*1 – 1) / 3.15%
• = \$17,315.08

Maturity amount will be \$17,315.08

Compounded interest earned would be \$17,315.08 – (\$1500 *10 ) = \$2,315.08.

The highest amount earned is in Bank II, and hence he should open an account with Bank II.

### Conclusion

This calculator, as discussed above, can be used to compare the different maturity amounts across the financial institution as a higher rate of interest doesn’t guarantee the highest absolute amount, as seen in the example above. Hence, one should calculate and compare the amounts across maturity and then take a decision.

### Recommended Articles

This has been a guide to the Simple Savings Calculator. Here we discuss how to calculate the savings or the maturity amount that shall be available to the individual along with step by step examples. You may also take a look at the following useful articles –