Savings accounts often pay dividends (also known as interest) on the money you deposit. This calculator helps you estimate your potential earnings based on your initial deposit, regular contributions, the annual dividend rate, how often the dividends are compounded, and the duration of your investment.
How the Calculation Works:
The calculation uses the future value of an annuity formula, incorporating compound interest. Here's a breakdown of the formula and its components:
Principal Amount (P): The initial amount of money you deposit into the savings account.
Additional Deposits (PMT): The amount you plan to deposit regularly (e.g., monthly, annually).
Annual Dividend Rate (r): The yearly percentage rate at which your money grows.
Compounding Frequency (n): The number of times per year the dividends are calculated and added to your principal. For example, n=12 means monthly compounding.
Number of Years (t): The total duration for which your money will be invested.
The effective periodic rate is calculated as: Periodic Rate = r / n.
The total number of periods is: Total Periods = n * t.
The formula for the future value of a series of deposits (annuity) with compounding interest is:
FV is the Future Value of the investment/savings account, including dividends.
P is the Principal initial amount.
PMT is the periodic payment (additional deposit).
r is the annual dividend rate (as a decimal, e.g., 5% = 0.05).
n is the number of times that interest is compounded per year.
t is the number of years the money is invested or borrowed for.
The total dividends earned are then calculated by subtracting the total amount deposited (initial deposit + total additional deposits) from the Future Value (FV).
Example Usage:
Let's say you deposit $5,000 initially (Principal = $5,000), add $200 each month (Additional Deposits = $200), your savings account offers an annual dividend rate of 4.5% (Annual Rate = 4.5%), compounds monthly (Compounding Frequency = 12), and you plan to leave it for 7 years (Number of Years = 7).
P = 5000
PMT = 200
r = 0.045
n = 12
t = 7
Periodic Rate = 0.045 / 12 = 0.00375
Total Periods = 12 * 7 = 84
Using the formula, the total balance after 7 years would be approximately $35,565.32, meaning you would have earned roughly $10,565.32 in dividends. This calculator helps visualize how different rates and contribution levels can impact your savings growth over time.
function calculateDividends() {
var principalAmount = parseFloat(document.getElementById("principalAmount").value);
var additionalDeposits = parseFloat(document.getElementById("additionalDeposits").value);
var dividendRate = parseFloat(document.getElementById("dividendRate").value);
var compoundingFrequency = parseInt(document.getElementById("compoundingFrequency").value);
var investmentYears = parseFloat(document.getElementById("investmentYears").value);
var totalDeposits = (principalAmount || 0) + (additionalDeposits * compoundingFrequency * investmentYears || 0);
if (isNaN(principalAmount) || principalAmount < 0 ||
isNaN(additionalDeposits) || additionalDeposits < 0 ||
isNaN(dividendRate) || dividendRate < 0 ||
isNaN(compoundingFrequency) || compoundingFrequency <= 0 ||
isNaN(investmentYears) || investmentYears 0 && periodicRate > 0) {
futureValue += additionalDeposits * (Math.pow(1 + periodicRate, numberOfPeriods) – 1) / periodicRate;
} else if (additionalDeposits > 0 && periodicRate === 0) {
// Special case: if periodicRate is 0, future value of annuity is just sum of deposits
futureValue += additionalDeposits * numberOfPeriods;
}
var totalDividendsEarned = futureValue – totalDeposits;
document.getElementById("totalBalance").innerText = "$" + futureValue.toFixed(2);
document.getElementById("totalDividends").innerText = "$" + totalDividendsEarned.toFixed(2);
}