Why do a deposit and monthly savings earn different interest at the same rate?
A lump-sum deposit earns interest on the full balance from the beginning. Installment savings arrive over time, so each contribution has a different holding period. Comparing only the advertised annual rate can be misleading.
A deposit is one cash flow; installment savings are many
Deposit principal P remains invested for the full term. For a monthly contribution A over N months, Future Balance assumes the first contribution earns interest for N months and the final contribution for one month. Even when total contributions equal a lump-sum deposit, installment interest is normally lower because most money is invested for less time.
Simple interest applies to principal; compound interest also grows credited interest
Deposit simple interest is P×r×N/12. Monthly compounding applies r/12 each month. The annual-compounding simulation credits compound growth for complete years and simple interest for remaining months. Installment savings calculate and sum the holding period of each contribution separately.
Deposit simple interest = P × r × N/12; installment simple interest = A × r/12 × N(N+1)/2Keep gross interest, tax, and net maturity value separate
Future Balance first truncates gross interest below the currency’s smallest unit. It then multiplies that interest by the selected tax rate and truncates tax below the smallest unit. Net maturity value equals contributed principal plus gross interest minus tax.
Worked example: 4% annual rate, monthly compounding, 24 months, 15.4% tax input
A 10,000,000 deposit produces gross interest of 831,429, tax of 128,040, and an estimated net maturity value of 10,703,389. Saving 500,000 monthly produces 12,000,000 principal, 513,015 gross interest, 79,004 tax, and an estimated net maturity value of 12,434,011.
The products have different contributed principal and cash-flow timing, so maturity value alone is not a fair measure of the rate effect. The final installment earns only one month of interest under this model.
What to verify in the product disclosure
- Check whether interest is simple or compound and whether compounding is monthly or annual.
- Check actual day-count rules, payment dates, maturity dates, and early-termination terms.
- Check bonus-rate conditions, tax treatment, exemptions, and the provider’s rounding order.
15.4% is an example input, not a universal answer
The 15.4% value in this example is a calculation input. Actual tax can differ by residence, product, law, and eligibility. If you select tax-exempt or enter a custom rate, confirm that the treatment applies to the product and your circumstances.
Why the estimate can differ from the amount a provider pays
Financial institutions can apply product-specific day counts, payment dates, holidays, bonus conditions, tax rules, and rounding sequences. Future Balance provides a monthly comparison estimate and does not replace an official maturity quotation.