April 20, 2020

How Much Interest Does $1,000 Earn?

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How do you calculate interest earned on a savings account? It's actually pretty simple. Find out how much interest $1000 will earn in a year.

How much interest will I get on $1,000 a year in a savings account?

If your savings account has an interest rate of 1%, you can earn $10 in interest for one year.

Reduce that interest rate to the national average of 0.07% and you would see $0.70 in interest for the year. You can't even buy a cup of coffee for that. Fortunately, some banks offer higher interest rates.

CIT Bank
Member FDIC

CIT Bank Money Market Account - 0.45% APY

  • 0.45% APY
  • $100 minimum opening deposit
  • No monthly maintenance fee
  • FDIC insured

How Much Interest You Will Earn on $1,000

Here is a table of how much interest $1,000 will earn in 1, 10, and 20 years at different interest rates:

Rate1 Year10 Years20 Years
0.00%$1,000$1,000$1,000
0.25%$1,003$1,025$1,051
0.50%$1,005$1,051$1,105
0.75%$1,008$1,078$1,161
1.00%$1,010$1,105$1,220
1.25%$1,013$1,132$1,282
1.50%$1,015$1,161$1,347
1.75%$1,018$1,189$1,415
2.00%$1,020$1,219$1,486
2.25%$1,023$1,249$1,561
2.50%$1,025$1,280$1,639
2.75%$1,028$1,312$1,720
3.00%$1,030$1,344$1,806
3.25%$1,033$1,377$1,896
3.50%$1,035$1,411$1,990
3.75%$1,038$1,445$2,088
4.00%$1,040$1,480$2,191
4.25%$1,043$1,516$2,299
4.50%$1,045$1,553$2,412
4.75%$1,048$1,591$2,530
5.00%$1,050$1,629$2,653
5.25%$1,053$1,668$2,783
5.50%$1,055$1,708$2,918
5.75%$1,058$1,749$3,059
6.00%$1,060$1,791$3,207
6.25%$1,063$1,834$3,362
6.50%$1,065$1,877$3,524
6.75%$1,068$1,922$3,693
7.00%$1,070$1,967$3,870
7.25%$1,073$2,014$4,055
7.50%$1,075$2,061$4,248
7.75%$1,078$2,109$4,450
8.00%$1,080$2,159$4,661
8.25%$1,083$2,209$4,882
8.50%$1,085$2,261$5,112
8.75%$1,088$2,314$5,353
9.00%$1,090$2,367$5,604
9.25%$1,093$2,422$5,867
9.50%$1,095$2,478$6,142
9.75%$1,098$2,535$6,428
10.00%$1,100$2,594$6,727
10.25%$1,103$2,653$7,040
10.50%$1,105$2,714$7,366
10.75%$1,108$2,776$7,707
11.00%$1,110$2,839$8,062
11.25%$1,113$2,904$8,433
11.50%$1,115$2,970$8,821
11.75%$1,118$3,037$9,225
12.00%$1,120$3,106$9,646
12.25%$1,123$3,176$10,086
12.50%$1,125$3,247$10,545
12.75%$1,128$3,320$11,024
13.00%$1,130$3,395$11,523
13.25%$1,133$3,470$12,044
13.50%$1,135$3,548$12,587
13.75%$1,138$3,627$13,153
14.00%$1,140$3,707$13,743
14.25%$1,143$3,789$14,359
14.50%$1,145$3,873$15,001
14.75%$1,148$3,958$15,669
15.00%$1,150$4,046$16,367

How Much Interest Will You Earn?

Interest on Savings Accounts

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Borrowing money comes at a cost: this is called interest. When the time comes to pay the money back, the interest is paid back in addition to the original amount that was borrowed.

When you deposit your money into a savings account, the bank is essentially borrowing your money. The bank then loans your money to borrowers and, in return, it pays you interest for letting it use your money.

How Is Interest Calculated?

The formula for calculating the interest you'll earn from a savings account is as follows:

I = P x R x T

Once you get a grasp of the following terms, it's simple to use:

  • I = Interest. This is the amount of money paid to you by the bank.
  • P = Principal. This represents the sum you deposited into your account.
  • R = Rate. This is the annual interest rate offered by the bank.
  • T = Time. Since we are considering an annual interest rate, time in this case is the number of years that has passed.

As an example, let's say that you deposit $1,000 into a savings account with an interest rate of 2.0%. If you wanted to figure out how much interest you will earn after one year, you would use the formula as follows:

I = $1,000 x 2% x 1 = $20

Your account balance at the end of the year would then be $1,020.

How Much Interest Does $10,000 Earn?

Rate1 Year10 Years20 Years
0.00%$10,000$10,000$10,000
0.25%$10,025$10,253$10,512
0.50%$10,050$10,511$11,049
0.75%$10,075$10,776$11,612
1.00%$10,100$11,046$12,202
1.25%$10,125$11,323$12,820
1.50%$10,150$11,605$13,469
1.75%$10,175$11,894$14,148
2.00%$10,200$12,190$14,859
2.25%$10,225$12,492$15,605
2.50%$10,250$12,801$16,386
2.75%$10,275$13,117$17,204
3.00%$10,300$13,439$18,061
3.25%$10,325$13,769$18,958
3.50%$10,350$14,106$19,898
3.75%$10,375$14,450$20,882
4.00%$10,400$14,802$21,911
4.25%$10,425$15,162$22,989
4.50%$10,450$15,530$24,117
4.75%$10,475$15,905$25,298
5.00%$10,500$16,289$26,533
5.25%$10,525$16,681$27,825
5.50%$10,550$17,081$29,178
5.75%$10,575$17,491$30,592
6.00%$10,600$17,908$32,071
6.25%$10,625$18,335$33,619
6.50%$10,650$18,771$35,236
6.75%$10,675$19,217$36,928
7.00%$10,700$19,672$38,697
7.25%$10,725$20,136$40,546
7.50%$10,750$20,610$42,479
7.75%$10,775$21,095$44,499
8.00%$10,800$21,589$46,610
8.25%$10,825$22,094$48,816
8.50%$10,850$22,610$51,120
8.75%$10,875$23,136$53,529
9.00%$10,900$23,674$56,044
9.25%$10,925$24,222$58,672
9.50%$10,950$24,782$61,416
9.75%$10,975$25,354$64,282
10.00%$11,000$25,937$67,275
10.25%$11,025$26,533$70,400
10.50%$11,050$27,141$73,662
10.75%$11,075$27,761$77,068
11.00%$11,100$28,394$80,623
11.25%$11,125$29,040$84,334
11.50%$11,150$29,699$88,206
11.75%$11,175$30,372$92,247
12.00%$11,200$31,058$96,463
12.25%$11,225$31,759$100,862
12.50%$11,250$32,473$105,451
12.75%$11,275$33,202$110,238
13.00%$11,300$33,946$115,231
13.25%$11,325$34,704$120,438
13.50%$11,350$35,478$125,869
13.75%$11,375$36,267$131,531
14.00%$11,400$37,072$137,435
14.25%$11,425$37,893$143,590
14.50%$11,450$38,731$150,006
14.75%$11,475$39,585$156,695
15.00%$11,500$40,456$163,665

How Simple Interest Works

Put simply, simple interest is the interest paid on the principal you initially deposit. The above formula calculates simple interest.

Some specific accounts, like certificates of deposit (CDs) with specific brokers, pay a simple interest rate. However, when you're considering where to stash your money, consider an account that pays you in compound interest instead.

Below we discuss why compound interest is the way to go.

How Compound Interest Works

With most savings accounts, the interest you earn isn't just on the money you initially deposit. Most savings accounts use compound interest. Basically, you earn interest on the interest that you earned the previous month or day, in addition to the interest you earn on your principal.

For example, let's say you deposit $1,000 into your savings account in January and earn 1% in interest each month. By February, you'd have $1,010. In March, you'd then earn 1% on $1,010, giving you $1,010.10. The power of compounding interest is that the money grows at an exponential rate.

Ben Franklin's Compounding Interest Experiment
When Benjamin Franklin passed away, he famously left the city of Philadelphia and the city of Boston $4,400 each in his will. The money was placed in a trust that was required to sit idle for a period of time before it was utilized. Why? Franklin wanted to harness the power of compounding interest to maximize the funds before the cities could put it to good use.

By 1990, the value of those $4,400 investments had ballooned to $6.5 million!

What is APY?
When researching savings accounts, you may notice that banks list the annual percentage yield (APY). While similar to the interest rate, the APY is different in that it factors in compounding interest. The APY takes into consideration how often your bank compounds interest, whether it be quarterly, monthly, or even daily. The APY, therefore, gives you a more accurate idea of how much interest you will earn than just the flat interest rate.

Savings Accounts

As you might expect, one of the most important things to consider when choosing a savings account is the interest rate and APY. Some online-only banks offer interest rates 10x higher than the national average.

In addition to the interest rate, you'll also want to be mindful of any fees the bank charges and special features they offer. Below we've rounded up some of the best savings accounts available today.

CIT Bank
Member FDIC

CIT Bank Savings Connect - 0.50% APY

  • Earn a competitive high yield savings rate with access and convenience features of an eChecking account.
  • Earn up to 0.50% APY on Savings Connect and 0.25% APY on eChecking.
  • Savings Connect is a tiered interest rate account dependent on the account holder opening a linked qualifying eChecking concurrently and makes periodic qualifying deposits.
    • Base Tier: (0.42% APY, 0.399% Interest Rate) A minimum qualifying deposit of $200 is not deposited each month into the linked eChecking or the eChecking account is closed.
    • Upper Tier: (0.50% APY, 0.499% Interest Rate) A qualifying deposit of $200 or more is deposited into the linked eChecking account each month.
    • APY assumes a qualifying deposit of $200 or more is made to the linked eChecking account each month.
  • Minimum of $100 for both the Savings Connect and eChecking to open ($200 total).
CIT Bank
Member FDIC

CIT Savings Builder - Earn 0.40% APY

Earn up to 0.40% APY. Here's how it works: Maintain a minimum balance of $25k OR make at least a $100 minimum deposit every month. Member FDIC

Discover Bank
Member FDIC

Online Savings Account - Earn 0.40% APY

  • No fees
  • No minimum opening deposit
  • No minimum balance required
Axos Bank
Member FDIC

High Yield Savings

  • 0.61% APY on balance < $25,000
  • 0.25% APY on balance $25K-$100K
  • 0.15% APY on balance > $100K
  • No minimum balance requirements
  • No fees to open or maintain account
  • Free ATM card upon request
  • FDIC Insured
UFB Direct

UFB High Yield Savings - Earn up to 0.20% APY

  • Earn 0.20% APY on balances of $10,000 and above
  • Member FDIC
Betterment

Betterment Cash Reserve - Earn up to 0.30% APY

  • FDIC insurance covering up to $1,000,000 at program banks
  • Access cash in 1-2 business days
  • No minimum balance
  • No fees on balance
  • Unlimited withdrawals

My Savings

  • Relationship pricing 0.20% / 0.30% (direct deposit of $1K)
  • $100 minimum opening deposit
  • No monthly service fee
  • No minimum balance requirement

What's a good interest rate for a savings account?
Many online-only savings accounts pay anywhere from 1.5 to 2.0%. Brick-and-mortar banks usually only offer interest rates as low as 0.03%. When evaluating a savings account, it's important to find a bank with a high interest rate but that also meets your banking needs.

Bottom Line

Savings accounts play an important role in your financial health. Using the power of interest, you have the opportunity to see your account balance grow in a savings account. Combined with regular deposits, a savings account with a good interest rate will set you up for financial success.

Write to Jeffrey B at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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