Savings Calculator

About the Savings Calculator

Most savings calculators answer a slightly wrong question. They tell you the balance at the end, gross and in future pounds, and leave you to imagine that the number means something.

Two things stand between that figure and anything you can spend.

Tax, which is taken as the interest is earned, so it reduces the rate that compounds rather than the balance at the end.

Inflation, which means £128,714 in twenty years is not £128,714 of today's shopping.

This calculator puts the real, after-tax figure first and shows the gross one beside it. The gap between them is usually the most useful thing on the page.

How to Use the Savings Calculator

What will I have? Enter your starting balance, what you save each month, the rate and how long for. Set the tax rate to zero for a tax-free account.

What do I need to save? Enter the target instead, and say whether that target is in today's money or cash at the time. That single choice changes the answer by a great deal, and the default — today's money — is almost always the one you mean.

The inflation field only affects how the result is expressed. It does not change the balance; it changes what the balance is worth.

Step-by-Step Example

£5,000 starting, £300 a month, 4.5%, 20 years, taxed at 20%, inflation 3%.

  Paid in:                    77,000.00
  Gross balance:             128,714.64
  After 20% tax:             115,483.10
  In today's money:           63,940.19

You put in £77,000 and end with the spending power of about £63,940.

The balance grew every single year. It grew more slowly than prices did. Nothing went wrong and nobody made a mistake — this is simply what happens when an after-tax rate of 3.6% meets 3% inflation over two decades, and it is invisible on any gross projection.

The real return here is 0.58% a year. That is the number the plan is actually earning.

Why Tax Comes Off the Rate, Not the Balance

The intuitive approach is to work out the interest and take 20% off it. That is wrong, and always in the flattering direction.

Interest in an ordinary savings account is taxed as it is earned. The tax you pay in year one is money that is not in the account for years two through twenty, so it never compounds. The shortfall compounds along with everything else.

  Tax taken off the rate     (correct):   115,483.10
  Tax taken off the interest (shortcut):  118,371.71

  Overstated by:                            2,888.61

The gap grows with the horizon and with the rate. The calculator shows both so you can see what the shortcut costs.

A tax-free account is therefore worth more than the tax rate suggests. Here it is the difference between £63,940 and £71,266 of today's money — over £7,000 — for nothing but the wrapper.

Why Inflation Is Division, Not Subtraction

The shortcut is to subtract inflation from the rate. The correct conversion divides:

  Today's money = balance ÷ (1 + inflation)^years

  115,483.10 ÷ 1.03²⁰  =  63,940.19

Similarly, the real rate is not 3.6 − 3 = 0.6%. It is:

  (1.036 ÷ 1.03) − 1  =  0.58%

Small here. Not small at higher rates, and the error compounds.

Is Your Goal in Today's Money?

This is the question the goal mode exists to ask, and almost nobody is asked it.

When you say "I want £50,000 in ten years", you are picturing what £50,000 buys now. But you will receive the money then, when £50,000 buys less.

  Target of 50,000 in today's money
  Grown by 3% inflation over 10 years  →  67,195.82 of actual cash

  Monthly needed, solved against 67,195.82:   416.36
  Monthly needed, solved against 50,000.00:   297.10

£416.36 against £297.10. A 40% difference in what you have to save, from a question most calculators never put to you.

Solving against the un-grown figure does not give you a slightly optimistic answer. It gives you a correct answer to a different, smaller goal.

Understanding Your Result

What it is worth leads with today's money, after tax, because that is the figure a decision should rest on.

In today's money shows the nominal balance beside the real one, so you can see exactly what inflation removed.

Before and after tax names what the tax cost, which is the case for a tax-free wrapper in one line.

Yours against interest splits the total between money you saved and money the rate produced. On short horizons the first dominates completely; on long ones the second takes over.

Worth knowing flags the case that applies — a negative real return, a horizon too short for the rate to matter, or the real return the plan is actually earning.

When Should You Use This Calculator?

Planning any goal more than a few years out. House deposit, wedding, school fees, a sabbatical. The longer the horizon, the more the gross figure misleads.

Deciding between a taxed and a tax-free account. The difference is larger than the tax rate implies.

Working out whether cash is the right home. If the real return is negative, you have the answer, and it is not "find a better savings account".

Setting a monthly savings amount. Especially with the target in today's money, which is the honest version of the question.

Checking a provider's projection. They are almost always gross and nominal.

Common Mistakes

Judging a plan by the nominal balance. £128,714 in twenty years sounds like a lot. It is worth £71,266 today before tax and £63,940 after.

Taking tax off the final interest. It ignores that tax paid early never compounds.

Subtracting inflation from the rate. Divide. The error grows with both the rate and the horizon.

Setting a goal in today's money and solving against it as cash. A 40% underestimate on a ten-year goal at 3% inflation, and worse on longer ones.

Assuming the rate holds. Easy-access rates can be cut at any time. A twenty-year projection at today's rate is an illustration, not a forecast.

Treating a long-horizon goal as a savings problem. If the real return is negative, no amount of shopping around for accounts fixes it. That is the boundary where saving ends and investing begins — and investing carries risk that saving does not.

Ignoring tax allowances. Many countries exempt some interest from tax. Set the tax rate to reflect what you will actually pay, not the headline band.

Every figure here is an estimate for planning. Rates, tax rules and inflation all change, and this is not financial advice.