Understanding Money Market Accounts and This Calculator
Money market accounts (MMAs) are a type of savings account offered by banks and credit unions. They typically offer higher interest rates than traditional savings accounts, but may come with certain restrictions, such as minimum balance requirements or limited transaction capabilities. MMAs are generally considered low-risk investments, often FDIC-insured up to the standard limit, making them a safe place to park cash you might need in the short to medium term or want to earn a better return on than a standard checking or savings account.
This calculator helps you project the potential growth of your money market investments over time, considering your initial deposit, regular monthly contributions, the annual interest rate, and the duration of your investment. It provides estimates for monthly interest earned, annual interest earned, and the total balance you can expect to accumulate.
How the Calculation Works
The calculator uses a compound interest formula adapted for monthly contributions. The core idea is to calculate interest earned each month and add it to the principal, allowing future interest to be calculated on a larger sum. The formula considers:
Initial Deposit (P): The starting amount you invest.
Monthly Contribution (M): The fixed amount you add to the account each month.
Annual Interest Rate (r): The stated yearly rate of return.
Investment Period (t): The number of years the money is invested.
For monthly projections, we first convert the annual interest rate to a monthly rate by dividing it by 12:
Monthly Rate (i) = Annual Rate (r) / 12 / 100
We also convert the investment period into months:
Total Months (n) = Investment Period (t) * 12
The calculator iteratively calculates the balance month by month. In each month:
The monthly contribution is added to the current balance.
Interest is calculated on the new balance using the monthly interest rate.
The calculated interest is added to the balance.
The "Monthly Interest Earned" displayed is an average of the interest earned in the last month of the projection. The "Annual Interest Earned" is an average of the interest earned over a full year within the projection period. The "Total Balance" is the final projected amount after all contributions and compounded interest over the specified period.
Note: This calculator provides an estimation. Actual returns may vary due to fluctuating interest rates, fees, taxes, and the exact timing of contributions and interest crediting by the financial institution.
function calculateMoneyMarket() {
var initialDeposit = parseFloat(document.getElementById('initialDeposit').value);
var monthlyContribution = parseFloat(document.getElementById('monthlyContribution').value);
var annualInterestRate = parseFloat(document.getElementById('annualInterestRate').value);
var investmentPeriodYears = parseFloat(document.getElementById('investmentPeriodYears').value);
var monthlyInterestEarnedSpan = document.getElementById('monthlyInterestEarned');
var annualInterestEarnedSpan = document.getElementById('annualInterestEarned');
var totalBalanceSpan = document.getElementById('totalBalance');
// Clear previous results
monthlyInterestEarnedSpan.textContent = "$0.00";
annualInterestEarnedSpan.textContent = "$0.00";
totalBalanceSpan.textContent = "$0.00";
// Validate inputs
if (isNaN(initialDeposit) || isNaN(monthlyContribution) || isNaN(annualInterestRate) || isNaN(investmentPeriodYears) ||
initialDeposit < 0 || monthlyContribution < 0 || annualInterestRate < 0 || investmentPeriodYears <= 0) {
alert("Please enter valid positive numbers for all fields. Investment period must be greater than 0.");
return;
}
var monthlyInterestRate = annualInterestRate / 100 / 12;
var numberOfMonths = investmentPeriodYears * 12;
var currentBalance = initialDeposit;
var totalInterestEarned = 0;
var monthlyInterestSum = 0;
var annualInterestSum = 0;
var interestEarnedThisMonth = 0;
var interestEarnedThisYear = 0;
var currentMonth = 0;
var currentYear = 0;
for (var i = 0; i 0 && numberOfMonths > 0) ? totalInterestEarned / numberOfMonths : 0;
var averageAnnualInterest = (annualInterestSum > 0 && investmentPeriodYears > 0) ? annualInterestSum / investmentPeriodYears : 0;
// Format currency
var formatCurrency = function(amount) {
return "$" + amount.toFixed(2).replace(/\B(?=(\d{3})+(?!\d))/g, ",");
};
monthlyInterestEarnedSpan.textContent = formatCurrency(interestEarnedThisMonth); // Interest from the very last month
annualInterestEarnedSpan.textContent = formatCurrency(averageAnnualInterest);
totalBalanceSpan.textContent = formatCurrency(currentBalance);
}