Savings Calculator

Savings account interest in India is calculated daily on closing balance, but credited quarterly. Formula: Daily interest = (closing balance × annual rate) / 365. Sum these daily interest amounts each quarter, and the bank credits the total to your account. So if you keep an average ₹1 lakh balance at 3.5%, you earn roughly ₹3,500 a year, paid out as ~₹875 per quarter. Some banks offer higher rates (5-7%) on balances above a certain threshold. Note: savings interest above ₹10,000 a year is taxable as per slab. The calculator handles all this.

Work backwards from the goal. Required monthly = FV × r / [((1+r)^n − 1)(1+r)], with r as monthly rate and n as total months. Example: ₹5 lakh in 4 years at 7% returns means about ₹9,000 monthly. If you can only earn 3.5% (savings account), you'd need around ₹9,700. Higher returns through liquid funds or short-term debt funds can lower the monthly requirement. Don't keep large goal amounts in pure savings — inflation eats them. The calculator does the math instantly when you enter target, timeframe, and expected return.

A regular savings account in India typically pays 3-4% (some neobanks offer 6-7%). A fixed deposit (FD) pays 6-7.5% for 1-5 year terms, varying by bank. The trade-off: savings gives full liquidity; FD locks money but pays better. For emergency funds, savings (or sweep-in FDs) makes sense. For surplus money you don't need for 12+ months, FD or debt mutual funds usually beat savings. Senior citizens get 0.5% extra on FDs. Tax treatment is similar — both are taxed as per slab. Use FDs for short-term goals, equity SIPs for long-term wealth.

More frequent compounding boosts returns, but the impact is modest at typical savings rates. ₹1 lakh at 4% for 5 years: annual compounding = ₹1,21,665. Quarterly compounding = ₹1,22,019. Monthly = ₹1,22,099. Daily = ₹1,22,140. So the gap between annual and daily over 5 years is around ₹475. At 8-10% rates and over decades, the difference grows. Most Indian savings accounts compound quarterly. Don't switch banks just for slightly better compounding frequency — look at the actual interest rate and credit quality first. The calculator handles all frequencies for comparison.

Keep 6 months of essential monthly expenses as your emergency fund. If your basic monthly outgo is ₹50,000, target ₹3 lakh. For freelancers, single earners, or those with dependents, push to 9-12 months. Keep this in a high-interest savings account (6-7%) or a sweep-in FD — somewhere you can access in 24 hours. Don't put emergency money in equity or long-term FDs; you'll regret it during a job loss or medical event. Build the fund first, before aggressive investing. Once parked, leave it alone. The calculator helps you set a savings timeline to reach the target.

For regular monthly deposits earning interest, use the future value of an annuity: FV = P × [((1+r)^n − 1) / r] × (1+r). P is the monthly deposit, r is the monthly rate, n is total months. Example: ₹5,000 monthly for 5 years at 7% (RD style). r = 0.00583, n = 60. FV ≈ ₹3,59,200. You've put in ₹3 lakh; interest earned is about ₹59,200. RDs (recurring deposits) work this way. Banks usually compound quarterly, so the actual figure may differ slightly. The calculator shows the exact maturity for the bank's frequency.

Inflation reduces the purchasing power of saved money. ₹1 lakh saved today, earning 4% in a savings account, grows to ₹1.48 lakh over 10 years. But at 6% inflation, prices have nearly doubled — what cost ₹1 lakh now will cost about ₹1.79 lakh. So your saved money has actually lost purchasing power. Real return = (1.04/1.06) − 1 = −1.9%. This is why pure savings accounts are wealth destroyers over the long term. Park emergency funds in savings, but everything beyond 6-12 months of expenses should go into instruments that beat inflation.