Money Market Account Calculator

Money parked, and what it earns while it sits

A money market account is where cash goes when it needs to stay reachable but should not sit idle. An emergency fund, a deposit being saved for, the proceeds of a sale waiting to be deployed.

This projects what a balance grows to if you leave it alone. Enter what you are putting in, the rate, how long, and how often the interest compounds, and it returns the final balance, the interest earned, the annual percentage yield, and a table showing the balance at five points along the way.

The APY line is the interesting one, because it is not a decorative extra. It is a specific regulated figure with a specific definition, and the difference between it and the rate you typed is the entire subject of two sections below.

Four fields

1. Initial Investment. The amount you are putting in at the start.
2. Annual Interest Rate. The nominal rate your bank quotes, before compounding is applied. Not the APY. There is a section on why below.
3. Investment Term. In months, up to 60. So a five year horizon goes in as 60.
4. Compounding Frequency. Daily, monthly, quarterly or annually, matching whatever your account actually does.

Press Calculate and you get the summary followed by a period breakdown.

Note the term is in months rather than years, which suits what these accounts are usually for. Cash parked in a money market account is rarely a twenty year plan, and the five year ceiling reflects that this is a tool for the near horizon rather than for retirement projections.

Two formulas, and one of them is written into law

The balance uses standard compound growth:

Balance = P × (1 + r ÷ n)^{n × t}

P is your deposit, r is the annual rate as a decimal, n is the number of compounding periods a year, and t is the term in years, which the tool works out from the months you entered.

Then the APY:

APY = (1 + r ÷ n)ⁿ - 1

That second one is not a convention somebody chose. In the United States, the annual percentage yield is defined by regulation. Under the Truth in Savings rules, it is a percentage rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding, calculated according to a prescribed method.

Which is why every US bank advertises savings products in APY rather than in the underlying rate. The regulation exists so that two accounts can be compared on one number regardless of how often each of them compounds.

And it is why this tool computes the APY for you rather than asking for it. Give it the rate and the frequency and the APY follows. That relationship runs one way, and the next section is about what happens when you feed it backwards.

Ten thousand at four and a half percent

Deposit 10,000, rate 4.5 percent, term 24 months, compounded daily.

The daily rate is 0.045 divided by 365. Over two years that is 730 compounding periods.

• Final balance: 10,941.68
• Interest earned: 941.68
• APY: 4.60 percent

Note the APY of 4.60 against a rate of 4.50. That gap of a tenth of a point is what daily compounding adds, and it is the number your bank would put in its advertising.

The same deposit under each compounding option:

The mistake that inflates your answer twice

The rate box wants the nominal annual rate. Your bank advertises the APY. Those are different numbers, and putting the second into the box meant for the first is the most common way to get a wrong answer here.

It goes wrong twice over, which is what makes it worth a section.

Take our example. The true rate is 4.5 percent compounded daily, which produces an APY of 4.6025 percent. Now suppose you saw 4.6025 on the bank's website and typed that in, leaving compounding on daily.

• The balance comes back as 10,964.13 instead of 10,941.68. Overstated by 22.45 on a 10,000 deposit over two years.
• And the APY line now reads 4.7098 percent.

You have compounded an already-compounded figure. The tool applied daily compounding to a number that already had a year of daily compounding inside it.

The second bullet is the useful part, because it gives you a built-in check. If the APY the tool reports is higher than the number your bank advertised, you have entered the wrong one. The APY it calculates should come out equal to what the bank quotes, or the input needs fixing.

Where do you find the right number? Ask the bank for the interest rate rather than the yield, since both appear on account disclosures. Or work backwards from the APY, which the nominal interest rate calculator does directly: give it the APY and the number of compounding periods and it returns the rate that belongs in this box.

What the compounding dropdown is actually worth

Look at that comparison table again and the honest answer is: less than the fuss about it suggests.

Across two years on 10,000, the difference between daily and annual compounding is 21.43. Between daily and monthly it is 1.78.

Less than two, over two years, on a ten thousand deposit.

The reason is that compounding gains shrink very fast as the frequency rises. Going from once a year to twelve times a year captures nearly all of the available benefit. Going from twelve to 365 captures a sliver of what is left. There is even a hard ceiling: no matter how often a bank compounds, it can never exceed the continuously compounded equivalent, and daily is already within a rounding error of it.

So the practical advice is to set the dropdown to whatever your account genuinely does, for accuracy, and then ignore compounding frequency entirely when choosing between accounts. A tenth of a percentage point on the rate is worth far more than a change in frequency, and an account advertising daily compounding at a lower rate is a worse account.

Compare on APY, which is what the regulation designed it for. It already accounts for the frequency, so it settles the question in one number.

The six rows underneath

Below the summary the tool prints a period breakdown: six rows, splitting your term into five equal stretches, showing the balance at each point and the interest earned during that stretch.

On our 24 month example, the intervals are 4.8 months each:

The first row is your starting point, so its interest column is zero by construction.

What the table shows that the summary cannot is the curve. Each stretch earns slightly more than the one before, 181.62 then 184.92 then 188.27, because each is working on a larger balance. Over two years the effect is modest. Over longer horizons it is what compounding is entirely about.

The intervals are fifths of your term rather than round months, so they land on odd figures like 4.8 months. That is the price of always getting five equal stretches whatever term you enter.

What the projection holds still

Two things the model treats as fixed that real accounts do not.

The rate. This is the important one. Money market account rates are variable. Unlike a certificate of deposit or a fixed term deposit, where the rate is locked for the term, a money market rate moves as market rates move, and the bank can change it. Project 24 months at today's rate and you have modelled a scenario, not a contract. When central bank rates move, expect yours to follow, in both directions.

Which makes a sensible habit obvious: run it at your current rate, then run it a point lower, and treat the pair as your range.

The balance. The tool models one deposit left untouched. No further contributions, no withdrawals. Since the whole point of these accounts is that the money stays accessible, most real balances move around a good deal, and every withdrawal reduces what is compounding from that day forward.

Two more things sitting outside the calculation. Interest earned is generally taxable in the year it is credited, so the after-tax figure is lower than what you see. And many of these accounts carry conditions, a minimum balance to earn the advertised rate, a monthly fee below that threshold, limits on withdrawals. None of that is in the arithmetic and all of it is in the account terms.

This is a planning estimate rather than a quote, and nothing here is financial advice.

Questions people ask

Should I enter the rate or the APY?

The nominal interest rate. The tool calculates the APY for you from the rate and the compounding frequency. Entering an APY compounds it a second time and overstates the result.

How do I know I entered the right one?

Check the APY the tool reports against the one your bank advertises. They should match. If the tool's APY is higher, you entered the APY where the rate belonged.

What exactly is APY?

A regulated figure reflecting the total interest paid on an account, based on both the interest rate and how often it compounds. It exists so that accounts with different compounding schedules can be compared on a single number.

Does daily compounding beat monthly by much?

Barely. On 10,000 over two years at 4.5 percent, the difference is 1.78. Daily against annual is 21.43. Compare accounts on rate and APY, not on compounding frequency.

Can I add monthly deposits?

Not in this tool, which models a single amount left to grow. For regular contributions over a longer horizon, the mutual fund calculator handles a monthly investment schedule.

Will my rate stay the same for the whole term?

Almost certainly not. Money market rates are variable and move with the market, unlike a fixed term deposit. Run the projection at your current rate and again at a lower one to see the range you are actually planning within.

Why does the term stop at 60 months?

Because these accounts are built for money that needs to stay reachable, which is usually a horizon of a few years at most. For longer projections a compound growth or lump sum calculator is the better fit.

Is the interest figure after tax?

No. Interest is generally taxable in the year it is credited, so the amount you keep will be lower than the figure shown.

References

The annual percentage yield is defined by regulation as a percentage rate reflecting the total amount of interest paid on an account, based on the interest rate and the frequency of compounding, and calculated according to a prescribed method. That definition and its calculation rules come from Regulation DD, the Truth in Savings rule. The distinction between that effective figure and a nominal annual rate expressed as a periodic rate multiplied by the number of periods in a year follows Regulation Z. The compound growth relation used for the balance is standard financial mathematics as set out in university materials for the actuarial syllabus.

1. Consumer Financial Protection Bureau (CFPB), Regulation DD, Appendix A to Part 1030: Annual Percentage Yield Calculation. https://www.ecfr.gov/current/title-12/chapter-X/part-1030/appendix-Appendix A to Part 1030
2. Consumer Financial Protection Bureau (CFPB), 12 CFR Part 1030, Truth in Savings (Regulation DD). https://www.ecfr.gov/current/title-12/chapter-X/part-1030
3. Consumer Financial Protection Bureau (CFPB), Regulation Z, Appendix J to Part 1026: Annual Percentage Rate Computations for Closed-End Credit Transactions. https://www.consumerfinance.gov/rules-policy/regulations/1026/j/
4. J. Robert Buchanan, Millersville University, Loan Repayment, MATH 372 Financial Mathematics I. https://sites.millersville.edu/rbuchanan/math372/LoanRepayment-handout.pdf