Savings Calculator - Definitions
Consistent investments over a number of years can be an effective strategy to accumulate wealth. Even small additions to your savings add up over time. This calculator demonstrates how to put this savings strategy to work for you.
| Term | Definition |
| Starting amount | The starting balance, or current amount you have invested or saved. |
| Additional contributions | The amount that you plan on adding to your savings or investment each period. The investment period options include monthly, quarterly, and annually. |
| Years | The total number of years you are planning to save or invest. |
| Rate of return | The estimated annual rate of return or annual percentage yield (APY) for this investment or savings account. Historically, the major stock indexes have averaged 11% to 12% per year. Past performance is no guarantee for future performance. If you plan on withdrawing your money within five years, you may wish to choose a more conservative rate of return. |
| Compounding | This is the frequency with which your investment's interest or income is added to your account. The more frequently this occurs, the sooner your accumulated interest income will generate additional interest. For stock and mutual fund investments you should choose 'Annual'. For savings accounts and CDs all of the options are valid, although you will need to check with your financial institution to find out how often interest is being compounded on your particular investment. |