1. What is Monthly Interest?

Monthly interest is the amount earned on a savings account balance each month, calculated based on the annual interest rate divided by 12 months.

2. How Does the Calculator Work?

The calculator uses the simple monthly interest formula:

Where:

• \( balance \) — Current account balance in dollars
• \( rate \) — Annual interest rate (as percentage)
• 12 — Number of months in a year

Explanation: The formula converts the annual rate to a monthly rate by dividing by 12, then applies it to the account balance.

3. Importance of Interest Calculation

Details: Understanding monthly interest helps savers estimate earnings, compare accounts, and plan financial goals more effectively.

4. Using the Calculator

Tips: Enter your current account balance and the annual interest rate offered by your bank. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this compound or simple interest?
A: This calculates simple monthly interest. Most savings accounts use compound interest, but this gives a basic estimate.

Q2: Why divide by 12?
A: The division converts the annual rate to a monthly rate since interest is calculated monthly.

Q3: How often do banks pay interest?
A: Most banks pay interest monthly, though some may compound daily and pay monthly.

Q4: Are there taxes on savings interest?
A: Yes, interest earnings are typically taxable income in most jurisdictions.

Q5: How can I increase my interest earnings?
A: Consider higher-yield accounts, CDs, or increasing your balance to earn more interest.