Savings vs. Stocks: What the Math Shows
Both savings accounts and stock investments use compound growth, but at very different rates. This calculator applies the future value annuity formula FV = PMT × [(1+r)^n − 1] / r to both scenarios with the same monthly contribution, letting you directly compare how they diverge over time.
Savings accounts offer guaranteed returns at current rates (typically 4–5% in 2024). Stock market investments have historically returned 7–10% annually but with significant short-term volatility. The longer the time horizon, the greater the compounding advantage of higher-return investments.
Note: this is a pre-tax comparison. High-yield savings interest is taxed as ordinary income; long-term stock gains qualify for lower capital gains rates in the U.S.
Frequently Asked Questions
A 0% savings rate means your principal grows to exactly your total contributions — useful for comparing no-interest cash savings against investing.
These are nominal (not inflation-adjusted) returns. To estimate real purchasing power, subtract your expected inflation rate (typically 2–3%) from each return rate before entering it.