How to Calculate the Dividends From a Savings Account

Savings are usually compounded monthly

If you have a savings account, you have probably seen the dividends from the interest paid to you for the funds in your account on your monthly statement. These earnings are the monies the bank pays you for the use of your money, and it is paid at a set rate each month. The amount paid is generally a percentage of the average daily balance in the account for the month. The interest is then added to your account, and more interest is paid on the total balance next month. The average percentage yield (APY) is the total actual percentage (including dividend accruals over the year) that a fixed sum in the account would earn.

Step 1

Refer to your statement or bank information to determine what the APY is for the savings account. If you are looking for a good interest on a savings account, be aware that private banks can set their own rate, so you shop around.

Step 2

Multiply the sum in the savings account by the APY to get the total annual interest that the sum would earn, including compounded dividends each month. For instance, if you were to put $5,000 in a savings account with a 3.25 percent APY, the annual yield would be $162.50.

Step 3

Quickly calculate the total amount that would be in an account at the end of the year by multiplying the original sum by 1 plus the interest rate. In this example, you would multiply $5,000 by 1.0325, meaning at the end of the year you would have $5,162.50 in the savings account.

Tip

Make sure you review the bank's policy for withdrawal or other fees, such as maintenance fees. A good interest rate may be more than offset by high charges for bank services.

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