Compound Interest & Savings Goal Calculator
See how your savings grow over time — or work out how much to set aside each month to reach a goal. Includes the 20% tax on Philippine deposit interest.
Savings & compound interest calculator
| Total contributions | |
|---|---|
| Interest earned |
Estimate assuming monthly compounding and a constant rate. Real rates change and are not guaranteed. With the tax box ticked, the rate is reduced to 80% to reflect the 20% final withholding tax on Philippine deposit interest.
How compound interest works
Compound interest means you earn interest on your interest. Each month, the rate is applied to your whole balance — including the interest already added — so growth speeds up over time. The longer you stay invested and the more you contribute, the bigger the compounding effect.
Mechanically, this calculator converts your annual rate into a monthly rate (annual ÷ 12), applies it to the running balance each month, then adds your monthly deposit. In formula terms, the future value is starting amount × (1 + r)n + monthly × ((1 + r)n − 1) ÷ r, where r is the monthly rate and n is the number of months. The second half of that expression is doing most of the work for ordinary savers: for a typical Filipino household, the size and consistency of the monthly deposit matters far more than the rate.
The important consequence is that interest is a small share of your balance early on and a large share late on. In the first year, almost everything you see is your own money. It takes roughly a decade at ordinary savings rates before interest becomes a meaningful slice of the total — which is why stopping and restarting is so expensive.
Worked example: ₱10,000 start, ₱5,000 a month, 4%
Take a realistic setup: you open an account with ₱10,000, add ₱5,000 every month, and earn an advertised 4% a year. Over 10 years you deposit ₱610,000.00 of your own money. Before tax, the balance grows to ₱751,157.35 — ₱141,157.35 of it interest. After the 20% final withholding tax, the effective rate drops to 3.2% and you end with ₱719,780.46, so the tax costs you ₱31,376.89 over the decade.
| After | You deposited | Balance at 4% | Balance after 20% tax | Tax cost |
|---|---|---|---|---|
| 1 year | ₱70,000.00 | ₱71,519.73 | ₱71,212.60 | ₱307.13 |
| 2 years | ₱130,000.00 | ₱135,545.87 | ₱134,413.00 | ₱1,132.87 |
| 3 years | ₱190,000.00 | ₱202,180.53 | ₱199,665.73 | ₱2,514.80 |
| 5 years | ₱310,000.00 | ₱343,704.86 | ₱336,596.97 | ₱7,107.89 |
| 10 years | ₱610,000.00 | ₱751,157.35 | ₱719,780.46 | ₱31,376.89 |
Notice the shape: after one year interest is only ₱1,519.73 on ₱70,000.00 deposited, but by year 10 it has reached ₱141,157.35. Nothing changed except time.
The 20% final withholding tax on interest
In the Philippines, interest on peso bank deposits is subject to a 20% final withholding tax, which the bank deducts automatically before the interest reaches your account. A "4%" advertised rate therefore nets you about 3.2%. It is a final tax: you do not declare it again on your annual return, and there is nothing to claim back. Tick the tax box in the calculator to see the realistic result — it is on by default, because that is what actually lands in your account.
The tax is charged on interest, not on your deposits, so its peso cost grows with the rate and with time. Here is the same ₱10,000 start and ₱5,000 a month over 10 years at four different rates:
| Advertised rate | Effective after tax | Balance before tax | Balance after tax | Tax cost |
|---|---|---|---|---|
| 2.0% | 1.60% | ₱675,810.30 | ₱661,930.66 | ₱13,879.63 |
| 4.0% | 3.20% | ₱751,157.35 | ₱719,780.46 | ₱31,376.89 |
| 6.0% | 4.80% | ₱837,590.70 | ₱784,305.07 | ₱53,285.63 |
| 8.0% | 6.40% | ₱936,926.58 | ₱856,362.35 | ₱80,564.22 |
This is also why Pag-IBIG MP2 is worth a look for money you can lock away: MP2 dividends are tax-free, so a 7% MP2 rate is not competing with a 7% bank rate — it is competing with a bank rate of 8.75% gross, because 8.75% × 0.8 = 7%. Very few peso deposit accounts advertise anything close to that.
Time beats rate: ₱5,000 a month, nothing else
If you strip out the starting balance and just save ₱5,000 a month at 4% (3.2% after tax), the arithmetic of patience is stark:
| Years saving | You deposited | Final balance | Interest earned | Interest as % of balance |
|---|---|---|---|---|
| 5 | ₱300,000.00 | ₱324,864.36 | ₱24,864.36 | 7.7% |
| 10 | ₱600,000.00 | ₱706,015.04 | ₱106,015.04 | 15.0% |
| 20 | ₱1,200,000.00 | ₱1,677,873.95 | ₱477,873.95 | 28.5% |
| 30 | ₱1,800,000.00 | ₱3,015,677.93 | ₱1,215,677.93 | 40.3% |
Doubling the horizon from 10 to 20 years doubles what you deposit but more than doubles the interest — ₱106,015.04 becomes ₱477,873.95. Chasing an extra half a percent is worth far less than starting five years earlier.
Goal mode: what it takes to reach ₱500,000
Switch the calculator to "How much to save monthly to reach a goal" and it solves the same formula backwards. Suppose you want ₱500,000 in 5 years, you already have ₱10,000, and you earn 4% before the 20% tax (3.20% after). You would need to set aside about ₱7,514.94 a month. Over 60 months that is ₱460,896.54 of your own money, with roughly ₱39,103.46 coming from interest.
Compare that with saving in a jar: with no interest at all you would need ₱8,166.67 a month, so the interest is doing about ₱651.72 a month of the work for you. Useful when you are sizing a house down payment against your take-home pay — see also the home loan calculator for what the other side of that goal costs.
Assumptions and limits
- Constant rate. Every projection assumes the same rate for the whole term. Real savings rates move, and promo rates on digital banks usually expire or apply only up to a balance cap.
- Monthly compounding. Some accounts credit interest quarterly or daily; the difference at these rates is small but real.
- Deposits at month end, never missed. The formula assumes a perfectly regular contribution. Miss three months and your result is lower than the projection, not just delayed.
- Tax modelled as a rate reduction. Ticking the tax box uses an effective rate of 80% of the stated rate, which mirrors the bank deducting 20% as interest is credited.
- No inflation adjustment. Figures are in today's pesos at face value; purchasing power will be lower at the end of a long term.
- PDIC coverage. Bank deposits are insured up to ₱1,000,000 per depositor per bank — worth remembering if a projection has you consolidating a large balance in a single digital bank.
Common mistakes
Comparing an advertised rate to a tax-free one. The single most common error. Always convert to the same basis before comparing — divide a tax-free rate by 0.8 to get the equivalent gross bank rate.
Assuming a promo rate lasts. Headline digital-bank rates are frequently introductory, capped at a maximum balance, or conditional on a payroll or spending requirement. Project with the rate you will actually earn in year three, not the one on the banner.
Saving before the emergency fund exists. Locking money into a long horizon and then withdrawing it in a crisis destroys the compounding you were projecting. Three to six months of expenses in a liquid account comes first.
Ignoring the fee side. Maintaining-balance fees, dormancy charges, and transfer fees are deducted from the balance and are not modelled here. On a small balance they can exceed the interest entirely.
Frequently asked questions
Is the 20% tax already deducted from the rate my bank advertises?
No. Banks advertise the gross rate. The 20% final withholding tax is taken
out as interest is credited, so what you actually receive is 80% of the
advertised rate — 3.2% on a 4% account.
Does this calculator work for investments, not just savings?
You can use it for anything with a roughly steady return, but leave the tax
box unticked for products taxed differently — MP2 dividends are tax-free, and
equity or fund returns are neither fixed nor taxed this way. For MP2
specifically, use the MP2 calculator,
which models annual dividend crediting rather than monthly compounding.
What rate should I assume?
Use the rate you can actually get today rather than an aspirational one.
Compare current offers in our
digital bank rate comparison,
and if the projection only works at an unusually high rate, treat that as a
warning about the plan.
Should I save a lump sum or spread it monthly?
For a fixed-rate deposit, earlier money earns longer, so a lump sum at the
start beats the same amount spread over the year. The calculator lets you
model both — put the lump sum in the starting amount field.
Why is my actual balance different from the projection?
Usually one of: a rate change during the term, a promo that ended, a balance
cap on the promo rate, missed deposits, maintaining-balance or dormancy fees,
or interest credited on a different schedule than monthly.
Put your savings where they earn the most — compare the best digital bank interest rates, check the tax-free alternative with the Pag-IBIG MP2 calculator, and budget from your net pay with the Take-Home Pay Calculator.
Last updated: 2026-07-08. Estimates assume monthly compounding and a constant rate; actual returns vary and are not guaranteed. Informational only, not financial advice.