What will your monthly savings
be worth at maturity?

The first and final installments earn interest for different periods

The first installment earns interest for the full term and the last for one month. With monthly deposits of 100 monetary units for 12 months at 6% simple annual interest, each installment earns 0.50 per month. The table shows three selected installments out of the twelve, before tax.

The interest-bearing months sum to 12+11+…+1=78. Total pre-tax interest is therefore 100 × 6% ÷ 12 × 78 = 39, on contributions of 1,200. Multiplying all contributions by 6% gives 72, which is simple interest on 1,200 deposited in full at the start for a year. That funding schedule differs from monthly installments.

Do not read the return on contributions as the quoted annual rate

In this example, interest of 39 divided by total contributions of 1,200 is 3.25%. This compares deposits made at different times with a single total. The annual product rate has not changed from 6% to 3.25%. The displayed return on contributions uses after-tax interest and therefore also depends on the tax input.

Tax applies to interest rather than deposited principal. A hypothetical 10% interest tax deducts 3.90 from interest of 39, leaving 35.10 and a maturity value of 1,235.10. The 10% is an arithmetic assumption rather than an actual product tax rate. Choose the tax setting that matches the contract.

Monthly compounding means interest also earns interest

Simple interest accrues on each deposit for its remaining term. Monthly compounding grows each deposit by the monthly rate for its remaining months. With identical deposits, term and rate, different interest treatment produces different results. Selecting compounding here does not change the terms of an actual product.

This model assumes equal deposits at regular monthly intervals. It excludes bank-specific day counts, late deposits, whole-unit truncation and early-withdrawal rates. If bonus-rate conditions are unmet or payment dates differ, review the applicable rate and actual deposit schedule when comparing the estimate.

Plans with the same maturity value can need different funding

Installment savings require money for future monthly deposits; a term deposit requires cash upfront. Compare initial funding and sustainable monthly payments as well as maturity values. This savings model gives even the final deposit one month of interest, whereas the investment model uses month-end contributions; account for that timing difference too. When comparing investing, keep contracted savings interest distinct from an assumed market return.

Calculate interest on an upfront term deposit · Model investing with the same monthly contribution

Why is the return lower than the annual rate?

Principal is added month by month. The first deposit earns interest the longest and the final deposit the shortest.

Simple vs. monthly compound

Simple interest applies only to principal. Monthly compounding includes previously earned interest in later calculations.

What is not included?

Early-withdrawal rates, government contributions, variable rates, and irregular deposits are excluded.

Saving $500 monthly for one year at 3.5%

This example uses equal monthly deposits, simple interest, and no tax deduction.

Total deposits

$6,000

Estimated interest

$114

Estimated maturity value

$6,114

The annual rate is not applied to every deposit for the full term. Each monthly deposit earns interest for a different length of time.

Frequently asked questions