Savings
Glossary
Every term used in this calculator, defined plainly.
- Principal
- The initial amount of money invested or deposited before any interest is earned.→ The "Starting amount" field
- Compound Interest
- Interest calculated on both the initial principal and all accumulated interest from previous periods. Produces exponential growth.
- APR vs APY
- APR (Annual Percentage Rate) is the stated rate. APY (Annual Percentage Yield) accounts for compounding within the year — always slightly higher than APR for the same underlying rate. Banks advertise APY for savings accounts because it's the higher number.→ Use APR in the calculator's "Annual interest rate" field
- Compounding Frequency
- How often interest is calculated and added to the principal. Daily, monthly, quarterly, or annually. More frequent compounding produces slightly more growth, but the difference is small compared to rate and time.→ The frequency selector in the calculator
- Real vs Nominal Return
- Nominal return is the stated percentage. Real return is adjusted for inflation. A 7% nominal return with 3% inflation is roughly 4% in real (purchasing power) terms.
- Rule of 72
- A quick way to estimate how long it takes money to double: divide 72 by the annual interest rate. At 7%, money doubles in roughly 72÷7 ≈ 10.3 years. See the full explanation at our Rule of 72 page.
Ready to calculate?
Put these terms to work.