See how your savings grow to $55,014

Compound interest means you earn interest on both your original deposit and all previously earned interest. At 5% with monthly compounding, $5,000 becomes $8,235 in 10 years without adding a cent — that's $3,235 earned purely from compounding. The real power comes from adding regular contributions. $300/month on top of that $5,000 produces $51,196 — of which $18,696 is interest you never had to work for. The longer your time horizon, the more dramatic the compounding effect becomes.

High-yield savings accounts in Australia typically offer 4.5–5.5% p.a. (as of 2025), usually requiring monthly deposits or linked transaction accounts. Term deposits offer similar rates with fixed terms of 1–5 years. For longer-term savings (10+ years), index funds and ETFs have historically returned 7–10% p.a. before inflation — but with market risk. Always compare the effective annual rate (EAR), not just the headline rate, since monthly compounding produces more than annual compounding at the same nominal rate.

A common benchmark is the 50/30/20 rule: 50% of take-home pay for needs, 30% for wants, 20% for savings. But the right amount depends on your goals. For a house deposit of $150,000 in 5 years, you'd need to save $2,046/month at 5% interest — use this calculator to work backwards from your goal. If you have high-interest debt (credit cards, personal loans above 8%), pay that off before prioritising savings beyond an emergency fund — the guaranteed "return" from eliminating 15–20% interest beats most savings rates.

Yes, but less than most people think for savings accounts. At 5% on $10,000 over 10 years: annual compounding gives $16,289; monthly gives $16,470 — a difference of $181. Over 30 years the gap grows, but the compounding frequency matters much less than the rate and how much you contribute. For loans, more frequent compounding works against you. For savings, it works for you. Most Australian savings accounts compound daily or monthly.