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Compound interest and your savings account

Interested in more interest? Compound interest lets you earn interest on your interest.  

Key takeaways

  • Compound interest means you earn interest on your initial savings balance and any interest you've already accumulated.
  • Compound interest makes your savings grow much quicker than simple interest.
  • Most savings accounts offer compound interest, which is calculated daily and paid monthly.

Compare compound interest savings accounts

1 - 12 of 183
Name Finder Score Maximum Variable Rate p.a. Standard Variable Rate p.a. Intro/Ongoing Government Guarantee Monthly Max Rate Conditions
Suncorp Bank Growth Saver Account
Suncorp Bank logo
Finder score
Maximum Variable Rate p.a.
5.05%
Standard Variable Rate p.a.
0.35%
Intro/Ongoing
Ongoing
Government Guarantee
Monthly Max Rate Conditions
  • Grow balance by $200 each month (excl. interest)
  • Only 1 withdrawal
  • No balance limit on earning interest
Go to siteView details
Ubank High Interest Save Account
Ubank logo
Finder score
Maximum Variable Rate p.a.
5.50%
Standard Variable Rate p.a.
0.00%
Intro/Ongoing
Ongoing
Government Guarantee
Monthly Max Rate Conditions
  • Deposit $500
  • Savings up to $100,000
Go to siteView details
ING Savings Accelerator ($150,000 - $500,000)
ING logo
Finder score
Maximum Variable Rate p.a.
5.40%
Standard Variable Rate p.a.
4.70%
Intro/Ongoing
4 months
Government Guarantee
Monthly Max Rate Conditions
  • Welcome rate applies up to $500K
Go to siteView details
Rabobank PremiumSaver
Rabobank logo
Finder score
Maximum Variable Rate p.a.
5.35%
Standard Variable Rate p.a.
1.45%
Intro/Ongoing
Ongoing
Government Guarantee
Monthly Max Rate Conditions
  • Grow your balance by $200+ each month
  • Balances up to $250,000
Go to siteView details
Macquarie Savings Account
Macquarie Bank logo
Finder score
Maximum Variable Rate p.a.
5.50%
Standard Variable Rate p.a.
5.00%
Intro/Ongoing
4 months
Government Guarantee
Monthly Max Rate Conditions
  • Balances up to $250,000
Go to siteView details
Newcastle Permanent Smart Saver Account
Newcastle Permanent logo
Finder score
Maximum Variable Rate p.a.
4.50%
Standard Variable Rate p.a.
0.05%
Intro/Ongoing
Ongoing
Government Guarantee
Monthly Max Rate Conditions
  • Grow balance
  • No more than 2 withdrawals
Go to siteView details
ING Savings Maximiser
ING logo
Finder score
Maximum Variable Rate p.a.
5.50%
Standard Variable Rate p.a.
0.55%
Intro/Ongoing
Ongoing
Government Guarantee
Monthly Max Rate Conditions
  • Deposit $1,000
  • 5 transactions
  • Grow your balance
  • Balances up to $100,000
Go to siteView details
Get 6 months free delivery and $50 Menulog credit with a new Orange Everyday & Savings Maximiser account. New ING customers only. Use code INGMENU1 and activate accounts by 24 Nov 2024. T&Cs apply.
IMB Reward Saver Account
IMB logo
Finder score
Maximum Variable Rate p.a.
5.25%
Standard Variable Rate p.a.
0.00%
Intro/Ongoing
4 months
Government Guarantee
Monthly Max Rate Conditions
  • Deposit $50
  • No withdrawals
  • Balances up to $1,000,000
Go to siteView details
Earn up to 3.25% p.a. after the introductory period ends.
First Option Bank Savings+Bonus Account
First Option Bank logo
Finder score
Maximum Variable Rate p.a.
5.00%
Standard Variable Rate p.a.
2.00%
Intro/Ongoing
Ongoing
Government Guarantee
Monthly Max Rate Conditions
  • Deposit $100
  • No withdrawals
  • Balances up to $249,999
Go to siteView details
Newcastle Permanent Online Savings Account
Newcastle Permanent logo
Finder score
Maximum Variable Rate p.a.
5.20%
Standard Variable Rate p.a.
1.00%
Intro/Ongoing
3 months
Government Guarantee
Monthly Max Rate Conditions
  • N/A
Go to siteView details
Bankwest Easy Saver
Bankwest logo
Finder score
Maximum Variable Rate p.a.
5.35%
Standard Variable Rate p.a.
4.00%
Intro/Ongoing
4 months
Government Guarantee
Monthly Max Rate Conditions
  • Balances up to $250,000.99
Go to siteView details
BCU Bonus Saver
BCU logo
Finder score
Maximum Variable Rate p.a.
5.00%
Standard Variable Rate p.a.
1.00%
Intro/Ongoing
4 months
Government Guarantee
Monthly Max Rate Conditions
  • N/A
Go to siteView details
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Showing 12 of 12 results

How the Finder Score helps you find a better savings account

The Finder Score is a simple score out of 10. The higher a savings account's score, the better we think it is for the average customer.

We score each savings account in our database of hundreds based on a data-driven methodology with 2 main criteria: Does the account offer a high interest rate? And is it easy for savers to actually earn that rate?

Read the full Finder Score breakdown

Sarah Megginson's headshot
Our expert says

"Compounding is like a magic trick that makes your money grow faster, or your debt grow bigger. Either way, it means that small, consistent efforts – even as little as paying $20 extra into your mortgage, super or savings each week – can make a big impact down the track."

Head of editorial

How does compound interest work?

The best way to explain how compound interest works is with an example using Finder's compound interest calculator:

  • Let's say you invest $20,000 in an account with an interest rate of 5.50% p.a. compounded for 5 years.
  • The initial investment of $20,000 earns $1,128.16 in the first year, giving you a total of $21,128.16.
  • The following year, you still earn the same rate of 5.50% p.a. – but this time it's applied to $21,128.16.
  • This will make your balance $22,319.95 after the second year, even though you haven't deposited any extra money into the account yourself.
  • This amount ($22,319.95) is the base for compounding for the third year, and so on. After 5 years, you'll have $26,314.08.

The longer your timeline ahead of you, the more your balance grows. In our fictional example, after 10 years, you'd have $34,621.53 and after 20 years, $59,932.51. This is without ever adding an extra cent of your own money.

To get the most benefit out of compound interest, deposit as much as you can into your account and restrict the number of withdrawals you make. The more money that is in your account at the end of the month, the more interest you will earn.

How can compound interest help you grow your savings?

compound interestCompound interest can turn a small amount of money today into a large amount of money over the space of 10, 20 or 30 years.

The longer your timeline ahead of you, the more you stand to benefit from compound interest.

How do banks calculate compound interest?

Interest is typically calculated on the daily closing balance. Here's the savings account equation:

  • Daily closing balance x interest rate (as a percentage) / 365

Interest begins to accumulate on the day the opening deposit is made in your savings account. It's then usually credited into your account on the last day of each month. If you choose to close your account, your accrued interest will be deposited on the day it's closed.

Any interest awarded to your savings account is usually available for use on the same day it's been credited. The daily closing balance of your savings account tends to include all cleared and uncleared transactions. This may be because electronic transfers to your linked bank account usually occur on a business day.

Alanna Glenn's headshot
Our expert says

"I would almost always put money into a savings account over a term deposit. Savings accounts earn compound interest (meaning you earn interest on the interest paid), whereas most term deposits only earn simple interest (meaning you earn interest only on the initial deposit)."

Publisher

How do you find the monthly interest rate?

The monthly variable interest rate will be clearly displayed on the provider's website under the product description for the particular account you’re looking at. Instead of going to each bank's website, you can take a look at the latest high interest savings account interest rates in our guide. It is important to remember that the interest rate is variable, meaning it will change from time to time.

Frequently asked questions

Karen Eley's headshot
To make sure you get accurate and helpful information, this guide has been edited by Moira Daniels and reviewed by Karen Eley, a member of Finder's Editorial Review Board.
Alison Banney's headshot
Written by

Editor

Alison Banney is the money editorial manager at Finder. She covers all areas of personal finance, and her areas of expertise are superannuation, banking and saving. She has written about finance for 10 years, having previously worked at Westpac and written for several other major banks and super funds. See full bio

Alison's expertise
Alison has written 626 Finder guides across topics including:
  • Superannuation
  • Savings accounts, bank accounts and term deposits
  • Budgeting and money-saving hacks
  • Managing the cost of living

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