How this instrument works
This sheet compounds two things on two different clocks and adds the results together. Current savings balance, $ grows on its own, exactly like a single lump sum left untouched — one figure, compounding month after month for the whole term. Monthly contribution, $ is different: each deposit starts its own clock the moment it lands, so the transfer made in month one earns interest for nearly the entire stretch, while the transfer made in the final month earns almost nothing. Adding up every one of those staggered deposits at once, rather than tracking sixty or a hundred and twenty of them by hand, is what the second half of the formula does.
The rate itself is applied monthly, not annually — Annual interest rate, % is divided by 1200, and Time horizon, years is multiplied by 12, so the compounding matches the cadence most savers actually live on: an automatic transfer that leaves checking for a savings or high-yield account on payday, every month, indefinitely. That structure is deliberately general-purpose. It doesn't ask what the money is for. The same arithmetic prices out an emergency fund, a house down payment, a car, a wedding, or any other goal built from a starting balance plus a recurring transfer, with no employer match, no vesting schedule and no contribution ceiling folded in.
Three things sit outside the arithmetic on purpose. Annual interest rate, % is held constant for the entire Time horizon, years, while a real savings or high-yield account moves its posted rate with the broader market whenever the bank chooses to change it. Monthly contribution, $ is assumed to arrive without a single gap. And Projected balance is a pre-tax, nominal figure — it does not check the FDIC insurance limit on a large balance, and it does not withhold anything for the interest income tax due the year that interest is credited.
- Enter what's already set aside into Current savings balance, $.
- Set Monthly contribution, $ to the amount you plan to transfer in every month, not a yearly total.
- Type the account's nominal annual rate into Annual interest rate, % — not the bank's advertised APY.
- Set Time horizon, years to how long the plan runs.
- Read Projected balance, $ for what the starting balance and every future deposit together reach.
Worked example — $5,000 plus $300 a month for 5 years
Set Current savings balance, $ to 5,000, Monthly contribution, $ to 300, Annual interest rate, % to 4, and Time horizon, years to 5. The monthly rate works out to 4 divided by 1200, or 0.3333%, applied across 60 months. The starting $5,000 alone compounds to $6,104.98 by itself; the $300-a-month stream, each deposit growing from the moment it lands, adds $19,889.69 on its own. Projected balance reads $25,994.68 — the sum of both pieces, to the cent.
Of that $19,889.69 contribution component, $18,000 was money actually transferred over 60 months, leaving $1,889.69 earned as interest. Stretch Time horizon, years to 10 with every other field unchanged and Projected balance rises to $51,629.10 — just short of double the five-year figure. The contribution stream more than doubles on its own, from $19,889.69 to $44,174.94, but the fixed $5,000 starting balance grows far more slowly at a modest 4% rate, only to $7,454.16, and that slow-growing piece is what holds the combined total under a true doubling.
Questions
How is this different from a 401(k) balance calculator?
Two structural differences, not just the name. This sheet compounds monthly — the annual rate divides by 1200 and the term multiplies by 12 — matching how most savings and high-yield accounts credit interest and how an automatic transfer actually works, deposit by deposit. A 401(k) projection instead compounds annually with one contribution a year, then layers an employer match and IRS contribution limits on top; none of that applies to an ordinary taxable goal like an emergency fund or a down payment.
Should I enter my bank's APY or its nominal rate?
Enter the nominal annual rate, before compounding — this field divides it by 1200 to get a monthly figure and compounds that monthly, which already builds in interest-on-interest. A bank's advertised APY has that monthly compounding baked in already, so typing the APY straight into Annual interest rate, % slightly overstates the projection: at a 4% APY the true nominal rate is closer to 3.93%, and the gap widens as rates climb.
What if I have a specific dollar target instead of a monthly figure?
This instrument answers the forward question — where a given monthly contribution lands after a set number of years — not the reverse. Knowing the number you need by a certain date, and solving for the monthly contribution that gets you there, is a different calculation: it takes the same starting balance, rate and time horizon and runs the compounding math backward instead of forward.
Does Projected balance account for taxes on the interest?
No. Interest credited to an ordinary taxable savings account is generally reportable income in the year it's earned, whether or not it's withdrawn, and a bank issues a Form 1099-INT once the amount clears a small threshold. Projected balance is the pre-tax figure the compounding produces; what actually survives after tax depends on your bracket and sits outside this arithmetic.
Does this check the FDIC insurance limit or account for rate changes?
No, and both matter for a real account. Standard FDIC deposit insurance covers up to $250,000 per depositor, per insured bank, per ownership category, so a projected balance above that at one bank exceeds coverage. Annual interest rate, % is also held constant for the whole Time horizon, years, while most savings and high-yield accounts move their posted rate with the market — a locked-rate certificate of deposit is the exception, not the rule.
What if I miss a month or stop contributing partway through?
The formula assumes Monthly contribution, $ arrives without a gap for the entire term, so a paused or skipped month isn't modeled directly. Approximate a break by lowering the figure to its effective average — a $300 target kept for 9 months of every 12 behaves close to $225 a month spread evenly — or split the plan into separate before-and-after runs and add the two projected balances together.
References
- CFPB — Bank accounts and services
- FDIC — Deposit insurance coverage
- IRS Topic no. 403 — interest income and Form 1099-INT
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.