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Saving and investing money are two keys to building wealth. The more you have to save and invest, the more your money can grow as it earns interest. There’s a significant difference, for example, between saving $500 and $75,000. So how much interest does $75,000 earn per year? The answer depends on where you’re keeping it and the interest rate you’re earning.
Simple vs. Compound Interest
Before calculating how much interest $75,000 can earn in a year, it helps to understand how interest works.
There are two types of interest that apply when saving or investing: simple interest vs. compound interest.
Simple Interest
Simple interest is the interest you earn on the principal balance. It doesn’t factor in any additional interest you earn over time.
If you deposit $1,000 into a savings account that earns a simple interest of 1%, you will have $1,010. After two years, you will have $1,020, assuming you make no additional deposits. At year three, you will have $1,030 and so on.
Compound Interest
Compound interest factors in both your principal balance and interest earned. You will often hear it referred to as “interest on your interest.”
To calculate compound interest, say that you have the same $1,000 in a savings account earning 1% compound interest.
After year one, you will have $1,010.05 if interest compounds daily. After two years, you will have $1,020.20, and by year three, $1,030.45. Even though you do not add any money to the account, your balance ends up being higher over time, thanks to the benefits of compounding.
Knowing whether to keep your money in an account with simple or compound interest can help you calculate roughly how much interest you could earn per year on $75,000.
How Much Interest Does $75,000 Earn Per Year in a Savings Account?
A savings account is a secure place to store money you don’t plan to spend immediately. You can open an account at a traditional bank, credit union or online bank. In return, the institution pays you interest on your balance for as long as your money remains in the account.
The amount of interest you earn on a $75,000 deposit largely depends on where you bank. Traditional brick-and-mortar banks often offer very low interest rates, sometimes as low as 0.20% APY. At that rate, your $75,000 would earn just $150.15 per year, assuming daily compounding.
Online banks, however, frequently offer much higher yields. With a 2.00% APY, that same $75,000 would generate about $1,515.06 annually, also with daily compounding.
While both account types offer liquidity and safety, the difference in potential earnings is significant. Choosing a high-yield online savings account can make your cash work harder for you, especially if you’re setting aside funds for near-term goals or building an emergency fund.
How Much Interest Does $75,000 Earn Per Year in a CD Account?
Certificate of deposit (CD) accounts are time deposit accounts.
When you open a CD, you agree to keep your money in the account for a set period of time. While the money is in the account, it earns interest, and when the CD matures, you can withdraw the money.
CD rates can vary widely, depending on where you bank and the CD term. As a general rule, banks tend to offer higher rates for CDs with longer terms.
What You Could Earn From $75,000 in a Year on Various CD Terms
| CD Term | Interest Rate | Interest Earned |
|---|---|---|
| 1 Year | 1% | $753.75 |
| 2 Years | 1.25% | $1,898.60 |
| 3 Years | 1.35% | $3,099.79 |
| 4 Years | 1.45% | $4,478.53 |
| 5 Years | 2.25% | $8,930.13 |
The higher the rate and the longer you leave the $75,000 in the CD, the more interest you can earn.
However, the catch with CDs is that you typically can’t withdraw your money before maturity without paying an early withdrawal penalty. The penalty might be a flat fee or a percentage of the interest earned.
How Much Interest Does $75,000 Earn Per Year When It’s Invested?
Investing can be more effective than saving when you want to maximize growth.
When you invest money, you put it into the market rather than leaving it in the bank. You might build a portfolio that includes several different asset types, including stocks, mutual funds, exchange-traded funds (ETFs) and bonds, depending on your needs and goals.
The value of your portfolio changes over time as the value of your investments changes. Ideally, your investments only increase in value year over year. The annualized rate of return you get can vary by the type of investment you own.
Here’s how $75,000 might grow over a year, depending on how it’s invested.
| Asset | Annualized Rate of Return | Return |
|---|---|---|
| Stocks | 7% | $5,250 |
| Bonds | 2.5% | $1,875 |
| Real estate | 10% | $7,500 |
Why do certain investments earn more interest than others? The simple answer is risk.
When comparing stocks vs. bonds, bonds can produce a higher rate of return. However, since bonds hold less risk, returns are usually lower.
Understanding your risk tolerance can help you decide how to invest $75,000 or a different amount to reach your investment goals.
How to Get the Most Interest From Your Money
Maximizing your interest earnings means choosing the right place to keep your money, based on your goals. The safest investment approach for many is a diversified portfolio. For example, if you have $75,000 to work with, for example, you may want to keep $15,000 in the bank as an emergency fund and invest the remaining $60,000.
You could open a traditional savings account at a brick-and-mortar bank. However, you may get a better rate with a high-yield savings account at an online bank. Online banks also often charge fewer fees than regular banks.
As for the remaining $60,000, you’ll need to decide how to invest it, based on the amount of risk you’re comfortable with. If you’re 30 years old, for example, then you might have a higher risk tolerance for stocks or real estate. You might put all of that $60,000 into those investments.
When choosing stocks, mutual funds or other securities, it’s important to consider the risk/reward profile. Something like a dividend stock, for example, can provide you with a steady monthly income. You may not see huge gains with an established stock like you might with a growth stock, but growth stocks may be a riskier bet.
How an Advisor Can Help Get the Most Interest From Your Money
Advice can be useful when earning interest becomes part of a broader financial plan rather than a single account decision. If you are holding a larger cash balance, managing multiple accounts or planning around future spending needs, deciding how interest fits into your overall strategy can be less straightforward than simply choosing the highest advertised rate.
Many of the choices involved are timing and structure decisions. You may be deciding when interest should be predictable versus flexible or how often income should be generated. It’s also important to consider how interest-based income fits alongside different types of income, such as wages, business income or retirement benefits. These decisions can affect cash flow planning as much as total returns.
A financial advisor can help review how interest-generating accounts interact with the rest of your finances. This includes examining how interest income affects taxes, how account rules limit access to funds and how interest earnings change as balances rise or fall. Advisors can also help identify whether interest income is supporting a specific goal, such as short-term spending, reserve funding or income stability.
Questions to ask your advisor include how interest income fits into your monthly budget and how long funds should remain untouched. It is also important to assess how rate changes can alter your plan. You may also want clarity on how interest compares with other income sources over time and how to adjust as your financial priorities shift.
As financial situations become more layered, interest decisions often connect to other planning choices rather than standing alone. A financial advisor’s role is to help organize those decisions so interest income supports your broader goals instead of working against them.
Bottom Line
There’s no one-size-fits-all answer to how much $75,000 will earn in interest. It depends entirely on where you choose to save or invest your money. As the examples here demonstrate, interest earnings can vary widely between traditional savings accounts, high-yield accounts and other investment options. Running the numbers across different accounts or assets can help you estimate your potential returns and make a more informed decision.
Ultimately, your earnings will reflect the type of account, the interest rate offered and how long you let your money grow.
Financial Planning Tips
- Consider talking to your advisor about how to formulate a financial plan that incorporates both saving and investing, if you’re not already doing so. If you don’t have a financial advisor, finding one doesn’t have to be a headache. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Aside from savings accounts and CD accounts, there are other options for earning interest on deposits. A money market account, for example, combines features of savings accounts and checking accounts. You can earn interest and make a limited number of withdrawals per month with an ATM card or paper checks. Interest-bearing checking accounts can also be convenient for earning a little interest on the money you plan to spend or use to pay bills.
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