How to Calculate Interest Rates & Savings

How to Calculate Interest Rates & Savings
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Putting money aside for the future is important, and over time those funds can accumulate a substantial nest egg. It is important, however, to keep track of the interest rate you are earning on the money you set aside. Placing your funds where you will get the best interest rate will help your money grow faster and allow you to accumulate an even bigger emergency fund or savings account.

Obtain a copy of your most recent bank statement. Find the average daily balance of your savings account.

Determine the amount of interest credited to your account over the last month. This amount will be shown on a separate line.

Use a calculator or spreadsheet program to divide the amount of interest you earned by the average daily balance in your checking account. This is the effective interest rate for the account. For example, if the balance on your savings account was $400 and you earned $2 in interest during the month, the effective monthly interest rate would be 0.50 percent: 2 / 400.

Multiply the monthly interest rate by 12 to determine the annual interest rate. For instance, if your monthly interest rate was 0.50 percent, your annual interest rate would be 6 percent: 0.50 x 12.