1. What is Monthly Savings Interest?

Monthly savings interest is the amount earned on a savings balance each month, calculated by dividing the annual interest rate by 12 and multiplying by the current balance.

2. How Does the Calculator Work?

The calculator uses the monthly interest formula:

Where:

• \( balance \) — Current savings balance in currency
• \( rate \) — Annual interest rate in decimal form

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

3. Importance of Interest Calculation

Details: Understanding monthly interest helps savers project earnings, compare accounts, and make informed financial decisions.

4. Using the Calculator

Tips: Enter balance in your local currency and annual rate as a decimal (e.g., 0.05 for 5%). Both values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: Is this simple or compound interest?
A: This calculates simple monthly interest. Compound interest would include interest on previously earned interest.

Q2: How does compounding frequency affect interest?
A: More frequent compounding (daily, monthly) yields higher returns than annual compounding at the same rate.

Q3: Why divide by 12?
A: This converts the annual rate to a monthly rate since there are 12 months in a year.

Q4: Can I use this for loan interest?
A: While the calculation is similar, loan interest may use different methods like daily balance calculations.

Q5: How accurate is this calculation?
A: It's mathematically precise for simple monthly interest, but actual bank calculations may use more precise methods.